This could be a possible hardware layout for your project.
1. The sensor produces an active low signal. It means that whenever a magnetic material passes nearby the sensor, the sensor output goes LOW. Because, the output of the sensor is open-drain, we need a pull-up resistor to be connected at Terminal-3 which we have done by activating the internal pull-up (Rpin) resisitor of UNO.
2. An I2C type (I2CLCD) has been added to reduce the number of jumper wiring.
3. The signal acquisition and processing algorithm is given below in the form of a Flow Chart. You may take time to convert this Flow Chart into Arduino/C coding. Begin from simple polling method for off time processing of the events and then slowly move to the interrupt method for Real Time processing of the events.