Most navigation systems today use some type of compass to determine heading direction. Using the earth's magnetic field, electronic compasses based on magnetoresistive (MR) sensors can electrically resolve better than 0.1 degree rotation. Discussion of a simple 8-point compass will be described using MR sensors. Methods for building a one degree compass using MR sensors will also be discussed. Compensation techniques are shown to correct for compass tilt angles and nearby ferrous material disturbances.