People who are doing operations such as threading on a CNC lathe conversion typically use an optical sensor and an interruptor connected to the spindle (for example, a metal tab on the back side of the spindle housing that rotates with the spindle) to generate an index pulse signal.
This is a typical interface board used to generate the signal for such a function:
http://www.cnc4pc.com/Tech_Docs/C3-I...ual_Rel5_1.pdf


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