To the amateur poker hand reading is almost metaphysical. It combines knowledge, intuition, pure speculation and observation into a tangible hand range for your opponent. While occasionally you will be able to place your opponent's exact hand more often you will have a range of hands that fit their behavior to that point; you can then compare your hand to that range of hands and derive the correct action. The first observation you must make in order to accurately assess what range of hands your opponent is likely to have is the character of your opponent.
Is he loose passive? Loose aggressive? Tight passive? Tight aggressive? Is he a weak or a strong player? Simply by observing how a particular player has played the hands in the immediate past you will be able to make more accurate predictions on how he is playing in the present; which is why it is important to always pay attention to the behavior of all of your opponents at the poker table. Never take your opponents word, or a few hands as the deciding factor here! Any information your opponent gives you is suspect and a single hand can be an aberration; on the other hand, if he has folded his last fifteen hands he's not likely to open raise A5.

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Once you have labeled your opponent, you must then analyze how he acts in the hand. When setting up a range of hands, it must be consistent with how they have acted on all streets. If a very tight player reraised preflop, it is unlikely he will have flopped the nuts on a KQJ board, for example, despite the fact that you bet and he reraised all in because it is extremely unlikely he would have reraised preflop with A10.
It is more likely he would have AA, AK or a set on that flop. While you may think a loose player, who can have nearly any hand, makes this a more difficult process that's not accurate; it simply is a more detailed equation. While you cannot narrow their hand range to a limited number of hands, you have the alternative advantage that your hand is more likely to be stronger than your opponents.