To improve the measuring accuracy of circular encoders in special applications, self-calibration of the circular encoder is necessary. The commonly used self-calibration method, namely the Equal Division Average (EDA) method, requires a large number of reading heads and cannot be used when the structural space is limited. In this paper, a self-calibration method for a circular encoder based on two reading heads with adjustable positions (TRAP) is proposed. This TRAP method uses two reading heads to simulate multiple reading heads, which can be used to achieve self-calibration of circular encoders in limited space. This paper investigates the principle of simulating multiple reading heads with two reading heads, designs and builds an experimental system, and obtains and analyzes experimental data. The experimental results show that the peak-valley value of the angle measurement error is reduced from 252.41″ to 18.82″ after self-calibration with the TRAP method, and the repeatability of multiple self-calibration experimental results is less than 0.75″. The TRAP method breaks through the limitation of the number of reading heads that can be installed during the self-calibration of the circular encoder and can effectively suppress the angle measurement error of the circular encoder.