I fish nymphs more than I do classic dry flies. Here is my take:
On small western streams I hardly ever use
indicators.
The smoother the flow(usually deeper) the more likely I am to use an unsinkable dry fly or foam as an indicator.
The more technical the water is (ie high pressure Blue Ribbon rivers) the more likely
I am to use some type of indicater.
Even if I am floating a baetis nymph in the surface film I often I often use a tiny
indicater to help keep track of my fly.
When I use an indicator I always use the smallest one possible, open my loops wade into the correct position, and use fine tippet from the indicator to the nymph.