#include <LiquidCrystal>

LiquidCrystal_I2C LCD = LiquidCrystal_I2C(0x27, 16, 2);

#define outputA 4
#define outputB 5

 int counter = 0; 
 int aState;
 int aLastState;  

 void setup() { 
   pinMode (outputA,INPUT);
   pinMode (outputB,INPUT);
   
   Serial.begin (9600);
   // Reads the initial state of the outputA
   aLastState = digitalRead(outputA);   
   
 LCD.init();
  // turn on LCD backlight                      
LCD.backlight();
 } 

 void loop() { 
   aState = digitalRead(outputA); // Reads the "current" state of the outputA
   // If the previous and the current state of the outputA are different, that means a Pulse has occured
   if (aState != aLastState){     
     // If the outputB state is different to the outputA state, that means the encoder is rotating clockwise
     if (digitalRead(outputB) != aState) { 
       counter++;
     } else {
       counter--;
     }
     Serial.print("Position:");
     Serial.println(counter);
     LCD.setCursor(0, 0);
  // print message
  LCD.print("Position:");
  LCD.print(counter);
   } 
   aLastState = aState; // Updates the previous state of the outputA with the current state
 }