Mice are often overlooked as motion or position encoders.
Peter L. Peres [plp at ACTCOM.CO.IL] says:
...the oldest trick: use an inexpensive casette tape head as pickup. You can use an external magnet or magnetize the screw (or the head). It is very sensitive. Picking up a #3 Philips screw head at 5 mm and 10 rot/sec is easy and the voltage goes up with rpm. I have used LM358 amplifiers with this.A {Hall Effect} sensor is a couple of orders of magnitude less sensitive than a magnetic head and you will have some noise problems likely. I had some.
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