The four most commonly used forms of classification are "loose passive", "loose aggressive", "tight passive" and "tight aggressive". The loose / tight refers to how many hands they play, both before the flop and then after the flop and the aggressive / passive indicates what they will do with a certain type of hand (the more aggressive the more likely to bet / raise, the more passive the more likely to call, folding of course is decided by how tight or loose they are). It is absolutely crucial to be able to place any particular opponent in these classifications in order to use your hand reading skills.
While many people decide these labels based on appearance, a single hand or other characteristics (gender / race) these are all terribly flawed models for determining what category your opponent fits into. It is only through observing your opponents play, over a period of time and a variety of hands, that you can accurately decide which camp to place your opponent in.

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It is also important to recognize that not all opponents fit into a simplistic category like this, some will play a certain style for a while and then mix it up, either as an active measure or as the result of some external force (tilt being a common example of this).
Since your opponents are also adapting to the other players you must consider not only the action itself but also the opponent in question. For example re-raising with AJ preflop against a limp from a maniac is a good play most of the time, whilst re-raising with AJ against a rock (tight player) would be a very unprofitable play.
Getting an accurate handle on your opponent and being able to determine what grouping best describes his play will enable you to make more accurate decisions in the hand and result in greater over all profit. In order to maximize the information at your disposal, it is crucial to pay extremely close attention to everyone at the table, every single hand. It is only through persistent observing that you will be able to turn your opponent’s predictability into your profit.