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Dire Straits
Tone profile
What makes this tone
Signal chain
Tone Character
Recorded tone character
Gain character
Very clean, with just enough warmth to keep the single-coils from sounding sterile.
Bass
Balanced and modest.
Mids
Neutral-to-slightly scooped, leaving room for the quacky pickup combination.
Treble
Glassy and detailed.
Brightness / presence
Open and airy.
Compression
Minimal amp compression; the fingerstyle attack supplies much of the dynamic character.
Effects
Essentially Strat into Fender Twin; no heavy effect chain is needed for the core sound.
Evidence / Sources
Tone character: glassy, quacky, clean, fingerstyle, articulate, dynamic, airy, snappy
Knopfler described the actual solo as essentially just the 1961 Strat and a Fender Twin, with the three-way selector jammed into an in-between position. His fingerstyle technique is as important as the equipment.
Essentially Strat into Fender Twin; no heavy effect chain is needed for the core sound.
Guitar
Mark Knopfler's 1961 Fender Stratocaster
Amp
Fender Twin
Channel
Clean Fender channel with substantial headroom
Pickup
In-between Stratocaster selector position created by jamming the original 3-way switch between positions