Many beginner anglers have an aversion to rigging up their fly rod. As a result of a general lack of experience and the dexterity that comes with such, common tasks like dealing with streamside tangles, rebuilding shrinking leaders, switching from a nymph rig to dry fly rig or even simply changing flies can either seem daunting or simply downright annoying. Even those of us that are more accustomed to standing streamside and tying nots and swapping leaders would still rather have our flies in the water than in our hands. However, fishing a rig that's improperly setup for the conditions at hand is likely, at best, to decrease one's chances of success.
So while making sure that all the aspects of your rig are setup properly for the conditions is important, chances are many of you will simply avoid adjusting your rig because of the perceived unpleasantries of doing so. When nymph fishing, one part of the rig that even the clumsiest knot tier in the world can't excuse him or herself from ignoring is the position of the strike indicator. Why? For one, because there's virtually no work involved in adjusting it. Regardless of the style of strike indicator you prefer (foam, bobber, yarn, etc), virtually all of today's strike indicators simply slide up and down your leader via one very simple adjustment method or another. However, more importantly, the position of your strike indicator shouldn't be ignored because it's crucial to successful nymph fishing.
Though the primary purpose of your strike indicator is to allow you to detect when a fish has taken or is otherwise screwing around with your fly, as a result of the fact that strike indicators are made to float, they also act as a bobber -- preventing the leader above the indicator from sinking while suspending the rest of leader, tippet, split shot and flies below.
If you're fishing your nymph rig through a 6 foot deep pool and your strike indicator is positioned 4 feet down your 9 foot leader, the deepest your fly can get is 5 feet. In some situations this might be what you're hoping to achieve, but most often you're trying to bottom bounce your nymphs, and without sliding your strike indicator up your leader, you ain't gonna make it. Likewise, if you're nymphing through a 3 foot deep riffle, you don't want 7 feet of leader and tippet below your strike indicator, since you're just introducing a great deal of slack line into your drifting rig -- and while monofilament and flourocarbon don't introduce drag the way fly lines do, they will contribute drag. The extra slack will poorly affect your presentation, make it considerably more difficult to know where your nymphs are drifting and make quick hook sets less likely.
So where should you position your strike indicator? Since you can't expect the leader and flies below your strike indicator to float through the water perfectly suspended at a 90 degree angle from your strike indicator (that is, unless you're fishing an Air-lock strike indicator), you've got to give yourself a bit of leeway. The general rule of thumb is that the distance between your strike indicator and your fly should be approximately one and a half times the depth at which you wish to wish to fish your fly. This is a generalized concept, so feel free to play around. The important thing is that you're thinking about the position of your as indicator move along the stream.