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I have an old vertical and horizontal cutting machine that is working manually it is kind of useless because it is hard to make accurate measurements. I want to use two digital sensor (with output for any controller) to find the position with less than 1mm error on two dimensions, left-right (with rack and pinion mechanism) 0 to 2,5 m and up-down (with roller screw mechanism) 0 to 1m. What kind of sensor do I have to use under 300 euros?

rack and pinion mechanism roller screw mechanism

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    $\begingroup$ Rotations are the way I would do it. That assumes linearity, but my guess is it might still be within about 1mm. Absolute and relative rotational position sensors can be found on eBay for $40 which have a resolution of 0.3° or so. Then all you might need with minimal circuitry: a pulse counting display module where you can apply a scaling for a digital readout, I'd bet there are some. $\endgroup$ – CL22 Jul 26 '16 at 8:15
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Buy yourself a DRO (Digital Read Out) kit from eBay/aliexpress or somewhere similar. They are within or close to your budget and should give you significantly more precision and accuracy than 1mm.
DRO kit

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