Terms like interest factor and liquidity factor are frequently used in correlation with grading.
Interest factor indicates how much demand a coin in likely to have among collectors. A high interest factor normally means that several thousand collectors are desirous of possessing that variety. A medium interest factor denotes that a few thousands or hundreds of collectors wish to have that particular coin. A low interest factor shows that only few collectors wish to have the coin under survey. With publicity the demand for a coin, and subsequently the Interest factor, may rise. Liquidity factor is another important term related to coin gradation. This measurement was developed by J.T.Stanton. It roughly estimates how fast a coin would be traded at an auction under normal market conditions. Liquidity factor is measured on a scale of 1-5. A liquidity factor 1 indicates that the coin would not sell easily and would probably have to be sold at some discount. On the contrary a coin having liquidity factor of 5 may be expected to be auctioned off very fast and at a higher price.
The grading system continued to grow more scientific and methodical with time. Another system that graded the proof coins used a scale ranging from PR-1 to PR-70. The original intention behind introduction of a precise grading system was to make coin trading easier. Yet the systems used graded the coins in a technical way, not very effective in the trading business. Thus the grade could not be related directly to a value with conviction. However the PGS system was a major leap towards reduction in the number of fake counterfeit coins that were streaming into the market. But in spite of all measures, some counterfeits continued to trick the grading system and passed as original.
Many more grading systems followed the PCGS. For instance, NGC (Numismatic Guarantee Corporation). ANACS is considered the third leading service. Other grading services are also available. This gave rise to considerable confusion in the coin industry as a coin may be of a lower grade according to one system as compared to that in the other. Debates ensued and collectors were frequently left bewildered. One grading system, the Compugrade tried to minimize the confusion by eliminating manual grading and utilizing computers to grade coins. However this too proved unreliable as the grading by computers failed to show consistency, In these times, no one thought of the possibility of introduction of an accurate grading system. But in present times, this need has been sorted out quite satisfactorily in the coin industry. Precise grading systems such as Full-Bell lines for the Franklin Half Dollars, Fully Split Bands (FSB) for the Mercury Dimes, 5 and 6 step Jefferson Nickels are in use now. For proof coinage, distinctions such as Cameo, Ultra Cameo have been introduced.
Collectors often bid on coins that are rare and were made in limited numbers. The information on such coins is collected from journals published by Coin grading Agencies. Collectors consider rarity, era, condition and other factors while buying a coin. Collectors place their faith on various grading systems and it’s difficult to predict which grading system gains popularity at a point of time. Since there are so many yardsticks and methods for denoting the grade of a coin, most collectors find it tough to decide which coins would best suit his collection. The technical grading system and norms are Greek and Latin to the layman. The only way one can streamline one’s knowledge on the subject of coin grading is by researching online, referring to guides on the subject, and with years experience one can learn to be an able and distinguished collector.