You may see trout feeding in water so shallow their dorsals are out of the water, but it's not common. They'll feed where the food is as long as their other needs for security, water temp/oxygenation, etc are met.
Often, if you are finding small knots in your leader it's because you aren't letting your back cast straighten all the way out before starting your forward cast/your back cast is losing power before it straightens out, causing your loop to close and cross the upper part of the leader. The easiest fix is to ensure you excellerate your back cast fast and stop the rod completely. Feel the rod and wait for the tug of the line straightening and loading the rod. Try practicing with your body turned so you can see your back cast or have someone video your casting. Then read up on "hauling".
All I can say from experience is, very shallow. The natural spring fed streams in north central PA that I use to fish throughout my youth would get quite low in the middle and end of summer and they held fish very well. Smaller native brookies thrive in just literally a few inches. It really is amazing, given proper shelter, temperature, and oxygen just how little water depth is required, and they always seem to find a way to stay hidden. I've pulled some nice fish from streams you would swear there was no place for a fish to be.
Also,why do I get knots in my leader after casting a while?
Likely tailing loops which is caused by the end of the flyline running into the rest of the line. Too fast acceleration with a short stroke (timing) can cause this, either on the forward or back cast. Also watch your rod tip tracking and alignment of the back cast.
We all know what tailing loops do but not many understand why it happens. I have always thought it was due to applying too much power on the forward cast at the wrong time. Lefty Kreh writes that ninety-nine percent of all tailing loops are caused by your delivery at the end of the cast. I quote his comments from his book, Lefty's Little Library of Fly Fishing.
"The remaining 99 percent -- 99 percent -- of all tailing loops are created by only one thing: by the caster driving the line straight ahead at the end of the forward cast, without doing anything else."
The other one percent is caused by a too weak forward or rearward cast that lets the line tip collapse towards the fly line. The one thing that Lefty suggest is to make a very small motion at the end of your delivery that lowers the rod tip slightly. This has to become an automatic action and has to be slight. He suggest you push down with your thumb on the top of the rod grip vary slightly to dip the rod tip. He also reminds you that a movement of 1/8th inch downward of movement at the rod tip will be close to a foot at the rod end. He suggests the tip not be lowered more than a "Frog's Hair." If you dip the tip too much you will open your loop.
When do you apply this slight drop to the rod tip? You apply it immediately after you have stopped the rods acceleration. You only do this on the cast delivery and not on your false cast. I must say that many times when I get a tailing loop it seems I have applied too much power to the cast. By lessening my attempt to cast into the next county, I can stop my tailing loops.
Since I do not have authority to quote from Lefty's Little Library I must hope he will forgive me. If you ever have an opportunity to buy Lefty's Little Library I suggest you jump on it. They are a great source of fly fishing information.
Frank's reply on tailing loops is spot on. Good advice from someone who knows whereof he speaks. As far as how shallow trout hang out I have two examples. The first is way back in my rookie days and the local businessmen from West Yellowstone, MT were out for a day's fishing and we were floating the Box Canyon stretch of the Henry's Fork. We were at the tail-end of the Salmonfly hatch and the fish were still looking up. I entered the river at a point where the water just covered the top of my boots. After fishing the middle of the river and catching a few smaller fish I aimed a cast just above where I had entered the stream and watched as a football sized head and mouth appeared and took my fly. I was so surprised I pulled it right out of the fish's mouth. I dropped another cast just like the first and I hooked into the largest trout I've ever had on the end of my line. He was feeding along a well-traveled bank in ten inches of water and about 6 inches out from the shore.
The second experience is on one of my favorite spring creeks where I go 'hunting' big Brown trout as they 'scud' and root out scuds from the weeds. The water barely covers their backs. They are spooky, but much fun when you finally get a hookup.
Frank's explanation is the definitive one, but frankly (no pun intended) a bit complicated to actually implement for those of us (like myself) that can't walk and chew gum at the same time. Here's a simpler remedy, taught me by the fly-casting instructor for our local Houston FFF club: too-long arcs in your casting stroke will probably produce fat loops; too-short arcs will probably produce tailing loops. Experiment while false-casting as a warm-up and you will quickly find the right stroke arc to avoid either fat loops or tailing loops.
bluegills and crappie can be a lot of fun, and you probably have a shot at bass too if you're catching them.
As others have said "windknots" are pretty common when folks learn to cast. Men especially have a tendency to try and muscle through a stroke to get distance, as opposed to concentrating on a smooth acceleration and sudden stops at the end of the forward and backward strokes. This link might be helpful: Fly Fishing Tips - Fly Casting - MidCurrent
As others have said trout will come up into very shallow water on occasion to feed--- but they are very vulnerable to predators like osprey when they do, so they typically won't hold in very in shallow water asa normal holding lie. When fishing streams i generally like to find water from knees to eyes deep, but you can also probably find some fish in water that's mid calf depth, especially if its a small stream with some shade and overhead cover, moderate to fast current, irregular bottom contour with scoops and holes and has a mix of rocks fist sized and larger. The overhead cover and choppy surface of faster moving water will help hide them from the eyes of predators, and the irregular bottom and rocks will offer breaks in current where trout can comfortably hold without having to some a lot of energy and provide "interstial" places for critters like stonefly nymphs to crawl around, provide hiding places for minnows and small fry, and serve as anchoring points for algae, mayfly nymphs and caddis larva. By contrast, the same water depth with a slower current, sandy bottom and uniform depth and no overhead cover would be less likely to hold trout because there will be less food in sand and less cover from predators.
If you fish moving water for trout and don't see any obvious feeding activity, your best bet is to "fish the edges" look for current seams where faster water (a conveyor belt bringing food) meets slower water (where a trout can hold without fighting current). You'll see these in front of and behind rocks and debris in the stream, along the outside of bends where the current cuts a deeper channel or "run", at the head and tail of pools, along ledges and drop offs, etc etc. Here's another link, This one is on reading water: Fly Fishing Books, Rosenbauer: "Reading Trout Streams" - MidCurrent
Thanks for the links Mark. I went to Saugatuck reservoir and there seemed to be some action.Unfortuneately I got moved along(very politely though) by a parks ranger as I didnt realise I needed a special permit to fish there. He was super nice about it and didnt fine me. I did get to practise my casting though and by the end of the day I seemed to get into a good(non-macho) rhytm. Its all technique...not power as you say.