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The Avid mechanical disc brake operation and adjustment is rather intuitive.  The objective with the adjustment procedure is to remove excessive slack from the cable (rarely exists) and to set the pads as close to the rotor as possible without drag.

Sometimes there is an In-line cable adjuster installed to facilitate cable slack removal and or play in the brake lever.  This device is not necessary as cable adjustment is not needed should the initial setup have been done properly since brake pad wear is compensated for by adjusting the brake pads at the caliper.

There are two brake pad adjusting knobs on the caliper, one for the outer pad and one for the inner pad.  Turning the outer red knob clockwise will move the pad closer to the rotor while turning the inside red knob clockwise (as viewed from the right side of the bike) will also move the inside pad closer to the rotor.

When adjusting the pads, be sure to squeeze the brake lever and release it before and after each adjustment followed by spinning the wheel and listening for drag.  The act of squeezing the lever re-seats the brake pads which effectively tells you what you have accomplished with each adjustment. 

All rotors have degree of wobble or run-out.  My experience has been that the degree of minor distortion changes with use and is more likely related to the degree of heat buildup resultant of braking efforts.  In other words, I have seen rotors with some wobble improve from use and therefore do not consider the amount of run-out to be static from experience.  That said, they can be trued up by taping them on the side lightly with a closed fist or pushing and pulling them with your fingers.  It does not take much to align them!

Cable Adjustment Procedure

If one is installed, use the In-line cable adjuster to remove any play from the brake lever.  A cable set too loose will have a lever that moves without pulling on the cable for a given travel.   Very slight play or just removing the play is considered an ideal setting.  Sometimes play in the lever is evident resultant of too much cable drag.  This can be improved by adding an assist spring from a retractable ball point pin that is installed between the caliper cable anchor bolt and the body of the caliper.  You simply run the cable through the spring and then re-anchor it.

Brake Pad Adjustment Procedure

1)  Back both knobs out CCW followed by squeezing the brake lever.  There should be no drag and the wheel should turn freely.

2)  Turn the outside knob in CW one click and test again.  Keep turning the outside knob CW one click at a time followed by another lever squeeze until you hear the brake lightly drag upon wheel rotation.  Once you find the point of drag, back it out by turning it CCW one click.  Squeeze the lever and it should again roll free and be silent.  

3) Repeat the entire process outlined in #3 above with the inside knob/brake pad and you will have it set up optimally.

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