The only place to set the threshold is where it sounds right, and feels right to you. This is a lot of trial and error, especially if you are relatively new to compression. No two compressors work the same, and no compressor works the same with different guitars.
I recommend starting with three extreme settings... full CCW, half way, and full CW. This will immediately tell you which direction the threshold is working. Next, find the place where you notice NOTHING, vs having PLENTY. What you want will likely be somewhere in between, but again - there are too many variables to say anything with certainty.
Always balance the level with the effect on/off. As you add more compression, you will need to raise the output level of the effect.
Good luck, and welcome to the compression rabbit hole!