While standards-based grading (SBG) has been implemented in school districts across the country, it faces two major challenges. As research on standards-based grading is limited, many practices under SBG are not substantiated by empirical evidence. Meanwhile, not all teachers are well prepared to implement SBG in the classroom. The lack of training and professional development on SBG has caused anxiety and fear among teachers and confusion among students. The goal of this didactic guide is two-folded: to serve as an instructional aid for classroom teachers to help them more prepared for conducting SBG, and to serve as a resource reference for educational researchers to conduct more empirical research on SBG. This writing focuses on how to conduct standards-based grading with the traditional point-based grading in comparison. This guide starts with the rationales for standards-based grading, then moves to its major components, and ends with a discussion of major challenges in using standards-based grading.