In order to help designate to which reading level your students belong, continuously use running records. This is an assessment tool in which you choose an unfamiliar book that will be challenging but not too difficult for the child. You listen to your students read the book while you make marks for each word of the text. There are a whole set of marks and abbreviations to use with this type of assessment, including self-correcting, repetition, substitution, etc. For more information you may want to get An Observation Survey of Early Literacy Acheivement, written by Marie Clay. She is credited with creating the concept of running records.