(MONEY Magazine) – Encasing rare coins in plastic slabs -- a practice pioneered just four years ago by fraud-conscious dealers -- was supposed to allow collectors to buy and sell with confidence. It hasn't worked out so simply. But there are ways you can reduce the risks that persist with slabs. Much of the problem stems from the way rare coins are traded. Prices are based on a subjective grading system that rates the coin's condition. The distinctions can be extremely fine. For example, uncirculated coins -- which account for most of the trading -- come in no fewer than 11 grades: MS60 through MS70 (MS stands for mint state). If you're not familiar with the fine points, you are at the mercy of your dealer. The potential for abuse is clear: A dealer can buy your coin cheap just by shaving a point or two off the grade. Or he can overcharge you by upgrading the coins he sells. A lot of money hinges on the scoring. The slabbed 1927 Saint-Gaudens $20 gold piece shown at left, graded MS65, is worth $3,250. If it were rated MS64, it would sell for only $1,400. And if it were one grade higher, its value would rise to $11,000. Hoping to ease public fears about the coin market, a group of leading dealers formed the Professional Coin Grading Service in 1986 to provide standardized appraisals. To prevent tampering with the coins they evaluated, the PCGS encased them in sealed plastic holders, or slabs. The minimum charge for appraisal and slabbing is about $26. So far, so good. But once investors and collectors began insisting on the slabbed coins, new grading outfits sprang up, not all of them honest. Says Beth Deisher, editor of Coin World, a collectors' and investors' journal: ''Every slab out there does not deserve the same measure of confidence.'' Indeed, there are more than two dozen grading firms that claim to offer independent, third-party evaluations. Yet only three firms' specimens are widely traded at shows, on the dealer network and sight unseen on electronic coin exchanges. Thus if you trade slabbed coins, assure yourself of at least a ready market by dealing only in those bearing the imprint of Numismatic Guaranty Corp. (NGC), the only firm of the three whose owners do not trade coins themselves; PCGS, now grading about 80,000 coins a month; and ANACS, the grading service of the American Numismatic Association. Knowledge of rare coins remains your best protection against chicanery. Says Phoebe Morse, regional director of the Federal Trade Commission in Boston: ''You can't shortcut this kind of homework with a slab.''