The FT8 Operating Guide written by ZL2iFB has some very helpful information on setting Transmit Levels along with comments on ALC. See Section 4.
A comment is made that the ALC meter on some rigs may also be considered a distortion meter. I have an ICOM radio which is mentioned and avoid any ALC indication.
In my case, I set my IC-706MKIIG at full power and adjust the power output with the Transmit Level Control on my Signalink Interface. A Bird Model 43 Wattmeter is used to set power levels anywhere from 2 watts to 50 watts. Note that changing the FT8 frequency may change the power output.
The transmit power is affected by the Windows Playback Level setting and the Windows Volume Mixer setting. I have the Volume Mixer setting at 50% as specified by Signalink. The digital program being used must be placed in transmit mode when making that adjustment.
I also use a small fan to help keep the radio cool. It makes a big difference. I'm using a 120 mm computer fan operating at reduced voltage.