When placing the bit in your horses mouth, the first thing that you need to aim for is 1 - 1.5 lip wrinkles in the corner of his mouth.
As a tip, horses that are over reactive in the mouth, eg. trying to get his tongue over the bit, then place the bit a little higher to void this. And with youngsters starting out, place the bit lower to encourage mouthing.
I will separate the fitting of bits into categories, as fixed cheek vs loose ring can be fitted differently. It is not uncommon for my customers to buy an eggbutt 0.25" smaller than their loose ring. Below will explain.
Fixed Cheekpieces - Eggbutts, D-Rings, Full Cheek, etc
To fit a fixed cheek bit correctly the lips may be gently sitting against the bit cheekpiece but not jammed in. You will need to assess how the bit is sitting in his mouth at 1. rest and then 2. with a contact. A snugger fit will restrict the bit from sliding back and forth across the mouth when changing direction.
WATCH: Measuring a Fixed Cheek Bit
Correctly fitting eggbutt snaffle
Loose Ring Bits
A loose ring bit will need more space on the corners of his mouth/lips to avoid pinching by the rotating loose rings. You do not want the lips covering any part of the hole that the bit slides through. As a general guide, you should allow one eighth of an inch from the corner of his lip to the hole we discussed earlier.
WATCH: Measuring a Loose Ring Bit
Correctly fitting loose ring snaffle
Measuring a Weymouth Bit
If at any stage you know that your bit fits yet you worry it may still be pinching your horse, I highly recommend a great product: aCavallo Gel Bit Guards, which can be used on any bit to avoid pinching or rubbing of the bit.