The knee position in riding has more influence on the quality of the entire leg position than its apparently modest location in the body would suggest — because the knee is the hinge that connects the thigh above it to the lower leg below it, and the angle, the pressure, and the direction of the knee determines whether the leg position above and below it is correct or whether it is producing the cascade of compensatory errors that a misplaced knee creates throughout the entire contact surface of the rider's leg on the horse's side. The correct knee position in all riding disciplines is one in which the knee is directed forward and slightly downward — pointed toward the horse's shoulder rather than toward the ground or toward the outside of the arena — with the inside of the knee lying flat and in contact with the saddle rather than gripping with the back of the knee or pressing with the front of the knee cap. The knee that is correctly positioned is the result of a correctly rotated thigh — the femur must be rotated slightly inward from the hip so that the flat inner surface of the thigh and knee lie against the saddle. This thigh rotation is the physical foundation of the correct knee position and the element most commonly absent in riders who struggle with knee placement. The knee that is turned out — pointing away from the horse's side rather than forward — is one of the most common position faults and one of the most impactful on the entire leg below it. When the knee turns out, the lower leg turns in as a consequence, pressing the calf against the horse's side in a constant undifferentiated contact that the horse learns to tune out rather than respond to, while simultaneously removing the inner thigh's contact with the saddle and replacing it with a gripping contact from the back of the knee and the calf. This is the classic pinching-with-the-knee fault — the knee that grips provides the illusion of stability while actually reducing it, because gripping with the knee levers the seat out of the saddle rather than keeping it in. The knee that is pressed too hard into the saddle creates its own set of problems. A knee that is actively pressed against the saddle uses the quadriceps and adductor muscles in an isometric contraction that travels upward to produce stiffness in the hip and restriction in the lower back, both of which prevent the hip from absorbing the horse's movement. The correct knee contact with the saddle is passive rather than active — the knee lies against the saddle because the thigh is correctly rotated rather than because the rider is actively pressing the knee inward. The height of the knee relative to the saddle flap is determined by the appropriate stirrup length for the discipline being ridden. In dressage and western riding the long leg produces a knee that is relatively lower on the saddle flap. In jumping the shorter stirrup produces a higher knee position that creates the angle in the hip, knee, and ankle that absorbs the impact of landing. In both cases the correct knee position — forward, flat, passively in contact — remains the same even as the absolute height of the knee changes with the stirrup length appropriate to the discipline.
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Watch: What Is the Correct Knee Position

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Mary Wanless: Rider Biomechanics — What Is the Correct Knee Position When Riding
Mary Wanless Rider Biomechanics