Coin grading is to determine the condition of the coin, the state of preservation, the degree of wear, the details or strike. All these factors will determine the grade of the coin and which it turn, determine the coin's market value.

Coins usually fall into 2 categories. Circulated or Uncirculated.

Circulated coins means that the coins have been in circulation and there are signs of 'wear and tear". Numismatic coins are usually circulated e.g. coins dating back to 1700 - 1900s.

The photo on the right is an example of a circulated coin - a US Trade Dollar dated 1874

Un-circulated Coins as the term suggest are coins that are not circulated. These coins usually comes from the Mint in rolls or bags and do not show any signs of wear nor handled by bare hands. Another term to take note of is Mint Sate. The coin is usually in perfect, pristine condition. It does not have any signs of wear except for some bag marks. One perfect example is the Mint or proof set.

The early coin grading guide were rather simple. Coin dealers used terms like poor, good, fine, and uncirculated. Coin grading is also quite subjective. Some say it is an art and others say it is science. A person may grade a coin as VF while another person may grade it as EF. Because personal opinion defers, this is where 3rd party grading comes in.

When a coin is graded by a professional 3rd party, it gives collectors and investors the assurance that the coin is genuine and promotes confidence of the buying and selling among numismatic community

Most grading companies today uses the  Sheldon Scale which is a 70-point scale for grading coins, developed by Dr. William Sheldon in 1949. Dr William Sheldon was a physician and medical researcher at the New York's Columbia University. It uses a 30 different grade designations that classified a circulated coin from a scale of low of 1 to 58 and 60 - 70 for uncirculated.

The Sheldon Scale of coin grading which Dr. William Sheldon developed in 1949 was to provide a precise meaning to replace the subjective terms such like Good, Very Good, Fine etc. Initially, coin collectors were not keen to use Dr. Sheldon's scale. It was in the 1908s that it became the bench mark standard because of third-party coin grading services which popularized it

Since then, a a slightly modified form of the Sheldon Scale has become the de facto standard for grading U.S. coins and eventually covers World coins also.

The tip to grading an uncirculated coin is guided by a framework of eight factors - Luster, contact marks, strike, color, toning, friction, coin or die flaws and obverse/reverse consolidation.  Each of this factor adds up and will determine the grade which in term determine the market value of the coin