A general guide would be to look for 1 1½ lip wrinkles at the corner of the mouth, but obviously this hinges on how short the horse's mouth is from the corner of the lip to the muzzle and also how fat the lips are. If the horse's mouth is short, then there may be more lip wrinkles in order for the bit to sit at the correct height, although it would not be fair to have our horses "grinning" like a Cheshire cat!!
If a horse is overactive in the mouth and trying to get the tongue over the top, position it a little higher to discourage this. When starting babies a bit that is a little lower will generally encourage mouthing.
To fit a fixed cheek bit correctly the lips may be gently brushing up against the cheek but not squished in. This needs to be assessed at rest and then again with a contact. A snugger fit will restrict the bit from sliding back and forth across the mouth when changing direction.
The fitting of this style of bit very largely depends on the design of the mouthpiece. A loose ring will need a little more allowance than a fixed cheek as we do not want the lips covering any part of the hole that the bit ring slides through (as this could cause nipping). When fitting a lozenged loose ring, as long as the lips are not covering any part of the hole at rest, this should prove OK as when a contact is taken the rings move further away from the corner of the lip. Take up a contact but make sure that you have your reins at the same angle as you would when you are on board, or better still find a friend to do this for you.
With a single jointed loose ring you will generally need ¼" (6 mm) clearance before the start of the ring on either side as a single jointed bit will move forward forming a "V" shape and shorten up in the mouth with a contact. Obviously we do not want the horse's lips to be pushed into the hole as the bit ring is sliding and cause any nipping or chafing.
This will not shorten up in the mouth when a contact is taken as long as the lips are not covering any part of the hole that the bit ring slides through at rest, this should be fine.
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