Coin collecting in the past has been made more difficult by very subjective coin grading.  Coin grading is the process of determining the condition of any particular coin.  There are three factors that determine the value of a coin.  The first is rarity, how many of the coins were produced and still survive.  The second is popularity or demand.  Even if a coin is produced in relatively small quantities, if there is no demand for it, the price will reflect that lack of demand.  The third, and arguably the most important, is the condition or grade of the coin.

There are two types of coins minted.  Those designed as high gloss examples are called Proofs.  These are intended as samples, gifts or collectibles.  They are not designed to be spent.  The other type is called a "business strike".  These coins are designed for circulation.  This circulation wears the coin down.  The better the condition, the greater the value.  Some coins wear better, or were struck better than others.  Some materials last longer than others.

The key to making the coin hobby successful on a large scale was finding a standard grading scale.  Many were tried over the years.  The current method has proved very successful.  It was developed by Dr. William H. Sheldon and is based on a 70 point numeric scale.  The lowest gradable coin is one that allows you to distinguish the type of coin and the date.  This is given a grade of 1.  Sheldon came up with numerical grades of 7 to 10 for Very Good, 12 to 15 for Fine, 20 to 30 for Very Fine, 40 for Extremely Fine, 50 for About Uncirculated, and 60 to 70 for Mint State.  Coin books use these grades to determine the coins value.

The ANA (American Numismatic Association) adopted it almost immediately and the PCGS (Professional Coin Grading Service) has used the 1-70 scale since they began in 1986.  The system enjoys wide acceptance among both collectors and dealers.  It has become popular to send coins to grading services.  PCGS, ICG, and NGC are the industry leaders in third party grading services.  The coins are graded and then sealed in a tamper apparent "slab".  Thus the grade of that particular coin is determined beyond doubt.  Standard, or 'unslabbed' coins are refered to as "raw" coins.  While coin investors look for slabbed coins, most pure collectors still prefer raw coins to slabbed.  This means you need to know how to grade your coins, or coins you are considering acquiring.  The complete, official grading system is listed below.

GRADE	GRADE ABBREVIATION	DESCRIPTION
Poor	PO-1	Identifiable date and type
Fair	FR-2	Mostly worn, though some detail is visible
About Good	AG-3	Worn rims but most lettering is readable though worn
Good	G-4	Slightly worn rims, flat detail, peripheral lettering nearly full
Good	G-6	Rims complete with flat detail, peripheral lettering full
Very Good	VG-8	Design worn with slight detail
Very Good	VG-10	Design worn with slight detail, slightly clearer
Fine	F-12	Some deeply recessed areas with detail, all lettering sharp
Fine	F-15	Slightly more detail in the recessed areas, all lettering sharp
Very Fine	VF-20	Some definition of detail, all lettering full and sharp
Very Fine	VF-25	Slightly more definition in the detail and lettering
Very Fine	VF-30	Almost complete detail with flat areas
Very Fine	VF-35	Detail is complete but worn with high points flat
Extra Fine	EF-40	Detail is complete with most high points slightly flat
Extra Fine	EF-45	Detail is complete with some high points flat
Almost Uncirculated	AU-50	Full detail with friction over most of the surface, slight flatness on high points
Almost Uncirculated	AU-53	Full detail with friction over 1/2 or more of surface, very slight flatness on high points
Almost Uncirculated	AU-55	Full detail with friction on less than 1/z surface, mainly on high points
Almost Uncirculated	AU-58	Full detail with only slight friction on the high points
Mint/Proof State	MS/PR-60	No wear. May have many heavy marks/hairlines, strike may not be full
Mint/Proof State	MS/PR-61	No wear. Multiple heavy marks/hairlines, strike may not be full
Mint/Proof State	MS/PR-62	No wear. Slightly less marks/hairlines, strike may not be full
Mint/Proof State	MS/PR-63	Moderate number/size marks/hairlines, strike may not be full
Mint/Proof State	MS/PR-64	Few marks/hairlines or a couple of severe ones, strike should be average or above
Mint/Proof State	MS/PR-65	Minor marks/hairlines though none in focal areas, above average strike
Mint/Proof State	MS/PR-66	Few minor marks/hairlines not in focal areas, good strike
Mint/Proof State	MS/PR-67	Virtually as struck with minor imperfections, very well struck
Mint/Proof State	MS/PR-68	Virtually as struck with slight imperfections, slightest weakness of strike allowed
Mint/Proof State	MS/PR-69	Virtually as struck with minuscule imperfections, near full strike necessary
Mint/Proof State	MS/PR-70	As struck, with full strike

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