Well, if I'd start from scratch I'd try to run experiments in different classes and see what works out best. Perhaps with a slight bias toward no grades because of the people in my life, there's a strong correlation between "cares a lot about grades" and "stress is psychologically harmful".

But fortunately I'm not starting out from scratch. People have made those experiments already. Grades suck.

Among other things that do work, guided retrospectives are one idea I would be tempted to implement. (Hell, we software developers know that too: when we want to get better, we hold retrospectives, we don't ask the scrum master to assign a letter grade!)