[Janis]

In this closed loop application there is no need for position control of shaft (these would be so called absolute encoders) , because here we need to control speed only. we ussually have used encoders with 1024 lines, less than 1000 only for high speed applications over 10000 rpm, if we need to control high precision position at low speeds we would go for 2000-5000 lines. This application should not go under 500 lines 1024 would be optimal

Edited: Actually controler will know position of shaft, because there are A and B signals for speed and direction, and index signal which is once per rev so controller will know position