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Neodymium button magnets are extremely cheap. This instructable explains how to make an angle encoder using 10 neodymium magnets and two hall effect transistors.

The encoder accuracy is within 1 degree.

The design is such that the components can be embedded within the joints of a robotic arm or servo plotter.

The estimated cost of the encoder, excluding the Arduino, is less than $10.00

Supplies:

- 10 only 6mm x 3mm neodymium button magnets
- 2 only 49E Linear Hall Effect Transistors

The following items were obtained locally:

- 1 only M4 x 20mm bolt
- 1 only M4 nut
- 1 only Arduino header pin strip
- Thin plastic coated hookup wire
- 3D printed parts (described later)”

Link to article