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The arrow-pointer meter is currently widely used. In this paper, we present a low-cost arrow sensor for reading water meter. To be compatible with the currently used arrow meter, this system involves embedding an electrical circuit into the body of a conventional mechanical water meter. The electrical structure includes signal generator, signal sensors, signal detection circuit, digital encoder, and remote controller, to sense the position of an arrow pointer. Based on capacitive signal-transfer theory, the best frequency is analyzed with transfer functions, to find the highest sensitivity between the sensing pad and the detection circuit. For a real implementation, one field-programmable gate array chip is mounted on water meter with printed circuit board layout. The measurements show that the proposed sensor enables average detection accuracy exceeding 95%. The power dissipation can be reduced about 144 times compared with the current electrical water meter.