Discussion Board for users of Heart of Dakota Curriculum
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I do think you can tell a lot by beginning at the start of Level 2 and testing the waters. 
In general, I think dictation is going well if dc get most of the passages correct, and miss only 1 or maybe 2 a week at most. Any more misses that that, and I think it is an indicator it is too hard. Many times, it is not the spelling dc forget, but the punctuation or the indenting. At least that has been the case for both of my dc. If you start the 7 yo, I'd definitely start with the first passage of Level 2. For your 9 yo, I would try the first passage as a trial run. You never know, sometimes dc forget more than we think they will, and 1 error of any kind is enough to repeat a passage in dictation. If you can tell that it was super easy for your 9yo, I'd jump ahead to the middle of Level 2, and give that a whirl. I'd probably stay there awhile, maybe a few week's worth. If he misses any, I'd probably finish out Level 2 from there, just give a good foundation. If he doesn't miss any and it still seems quite easy, I'd move him ahead to doing just the last 20 passages or so of Level 2 and see how that goes. Again, if he doesn't miss any for a few weeks, I'd move him up to Level 3 and go through that whole level from start to finish with him. The levels increase quite a bit in difficulty throughout the year, so that is why I'd go about it this way, but that is just my idea, so do whatever you think would be best. HTH!