Are you mixing/producing a song or is this for performance?

The basic rule of thumb that I follow is that all output levels should be as strong as possible. Also, with Live, I've noticed that the signal can run hot (in the red) without clipping, much like a good ol' Pioneer mixer. I don't stress the occasional bounce into the red, but I never let it stay there. Can anyone else confirm this? It would make sense since it's geared toward the DJ types in this way and I have not seen any literatur to contradict it. I lost my manual ages ago in a move, so I haven't looked it up.

Star...more info please if you want more than a guess of a response.

I tend to keep my faders at -6, by default... I adjust them accordingly; if the song is quieter and is only reaching -6db, then I'll raise the level to come as close to 0db as is possable (when I want it to be loud)... some songs are louder or have stronger peaks... if they begin to hit the red, I pull down the fader to keep the levels below 0db. Live does have extra headroom to keep our sound from clipping, but it's good practice to keep it in the green.
On the master bus, I keep the fader at 0db, always... this keeps the output at full bit depth... by pulling down the master fader, we lose 1 bit per every -6db (Terekith's guide to mixing/levels).
If effects raise the output, I pull down the fader to keep the peaks below 0db. I avoid compressors and use effects as moderately as possable if they effect the sound to the point that they're creating unexpected peaks. Even if you choose to use a compressor, I suggest having it on only as an emergency peak controller, keeping unexpected peaks from killing anyones ears or soundsystems; compressors have to take the sound from somewhere, and that happens to be from your music.
Happy playing.