One other consideration.
One must understand what the tool is measuring before one can understand how to use it. A hydraulic lifter has a physical range of possible compression. It can be all the way compressed or it can be all the way out. This distance is significant (large). It probably is an 1/8 inch or more. The desired state of compression is the distance that one wants to measure as that is the working relationship in question. The permissable difference in the acceptable compression is also a large number. What is most important is that the lifter isn't going to bottom out. In other words. The design is such that the lifter is intended to be in a state of collapse. The amount is what you measure. In a running motor the spring in the lifter takes up the clearance (with a prescribed amount of collapse) and the oil behind it makes it semi-ridged in this floating position - thus "hydraulic" lifter.
Now for the consideration. The measurement will be eventually made after the lifter is collapsed to its working height. I don't do this work anymore but on V8s where I did we had to squeeze the lifters in a vise to get the oil out so that they would collapse to their working height on assembly. The spring inside the lifter will bring it to full working extention for measuring. If one assembles an extended lifter FULL of oil it will not collapse (It stays extended). Be sure this isn't your original problem as you will have to know this to measure the collapse.
Bosch Master, ASE Master, L1
33 years MB technician