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Shimano Disc Brakes Inefective
For a while my rear brake has been ineffective. I originally thought it was contaminated either the pads or the discs.

Basically the lever has the be pulled all the way back to the bars to make anything work. But at the start of a ride they squeal a lot. Usually by the end of a long downhill if I have had the brake on all the way down it will start working effectively but then when I start my next ride its back to being ineffective and squeals.

I have replaced pads, rotors and bled the system twice. I have even cleaned both the pads and discs with brake cleaner and sanded down rotors and pads.

Even after bleeding the system the lever can be pulled all the way back to the bars. The front lever bites almost immediately.

My next step was to replace the levers and caliper? Anyone else got any ideas?

This is the system I have:
Shimano A-M506, Hydr. Disc Brake (180/160)
just say "NO" to disk brakes on bikes.     Smile
It sounds like you have an air bubble that remains after you bled the brakes...

I'd try re-positioning the bike such that there is a direct vertical line between the drain screw and feed... and an hour  prior to doing the bleed again, wrap a cord around the brake lever such that it is activated.  This is a motorcyclists approach to get an errant bubble out of a caliper.    being open might allow bubble to move  and float upward, and a second bleeding might then dislodge it..

Release the cord grip from level prior to the bleeding...

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