It is well known that slotting harmonics exist in most of the electrical machines. So far, these harmonics are mainly identified using spectral estimation techniques. However, this approach requires long sampling and computation periods. In this study, a novel speed and position estimation method based on identification of rotor slot harmonics (RSH) that does not require any kind of spectral analysis is proposed. The required information is extracted by demodulating the information available in an external search coil (or in phase current). The algorithm used for this purpose is fast and can be applied within a typical control cycle of a vector controlled drive algorithm. In the application of the method here, higher order RSH have been utilized. In this manner, the position estimation resolution increases and also possible effect of harmonics stemming from other sources are avoided. The approach is explained in the paper and illustrated with experimental results.