A method of determining a direction of rotation of a shaft is disclosed, as well as an integrated circuit chip that uses the disclosed method. The method includes receiving a first binary signal and a second binary signal from a transducer attached to the shaft, with the first and second binary signals being in quadrature. A present quadrant identification number, QIDPRESENT, is determined as a two-digit binary number by left-shifting a value of the first signal and adding a value of the second signal. After a sampling interval has elapsed, the method sets a past quadrant identification number, QIDPAST, to the value of said QIDPRESENT, determines a new value of QIDPRESENT and calculates a value of a transition code using an equation that operates on QIDPRESENT and QIDPAST. The method uses the transition code to determine a direction of rotation of the shaft.