Many older radios had only two positions for AGC- slow and fast. Slow would usually be used for SSB, while fast would typically be used for CW. With adjustable AGC, here is no "officially correct" setting of the AGC control other than the setting that sounds and works best for you. All the AGC control does is adjust how quickly the ACG responds to signals of varrying strength. Being able to adjust the ACG time constant can make copy easier in varying band conditions.
For example, if there is little QRM and I'm not crowded by other stations, I prefer to set the AGC control on my TS2000X to its slowest setting. It helps reduce the noise floor between each character and make the CW note stand out better. If the band is crowded, I'll set it to its fastest setting to reduce the effects of AGC pumping from strong stations on nearby frequencies. When quickly tuning across the band, I like to set the AGC to its fastes setting- this eliminates missing any stations due to the recovery time of the ACG circuit. For broadcast AM and SW listening, I usually set it someplace in the middle.
Try experimenting with different settings under different conditions, and see which way sounds best to you- that's where you want to set it.
73, de Tom, KA1MDA
www.ka1mda.org 
