The damper is a very important factor in the efficient operation of your pellet stove. Learning the best damper operation for your stove is a process. It is impossible to tell you exactly where to position your damper for each heat level setting as every stove and installation is different. In addition, each stove is hand built and this can cause some minor variations.
During installation some people will use 3” pipe, others will use 4” pipe. Some people have one elbow, others have two. Your elevation makes a difference, pellet quality, cleanliness, barometric pressure, etc. All of these things make a difference on exactly where your damper needs to be set for each heat level setting.
You want the damper open enough to give plenty of air to the fire, without causing a blowtorch appearance to the flames. You do not want very much white or blue color in the flame. This means you are giving too much air to the fire.
You also want to avoid a lazy orange flame that flickers back and forth and has black tips. If you get this lazy flame, you are not giving enough air to the fire.
The flame should be a robust yellow flame that stands basically straight up.
As a general guideline when you first start your stove the damper should be completely closed, or perhaps 1/8” open. This will generally result in a faster ignition, as more air will be forced through the igniter housing. When you adjust the heat level setting you also need to adjust your damper. As a general rule for each heat level increase you will need to open the damper an additional 1/8” or so. If you lower the heat level setting you will close the damper the same amount. These are just general guidelines to hopefully help you learn your damper. As stated, this is something that you will have to learn for your individual stove and exhaust configuration. Most people will figure out the best settings for their own unit within a couple of weeks.