I concur with Iride01 that you should set saddle height before worrying about other saddle adjustments. Placing your heel on the pedal with your leg totally straight is a good method for getting your saddle height in the ballpark of "correct". From there you should only need to move it up or down very little (if at all). As a starting point I'd also make sure the saddle is level when setting height and that it is positioned on the center of the saddle rails. This would equate to a good, neutral starting position from which you can experiment if it doesn't feel quite right.

Keep in mind that the "right position" might not feel perfect at first, so give it chance by riding a few miles before making adjustments. And when you do make adjustments, keep them to relatively small movements. Also keep in mind that when you move the saddle more forward on the rails or further back on the rails you are also impacting saddle height. A saddle moved further back on the rails will also make the saddle feel like it has been raised because your feet are moved further away from the pedals. A saddle moved further forward on the rails will make it feel like the saddle has been lowered because your feet are moved closer to the pedals. So keep in mind that when making fore/aft adjustment you will likely need to adjust saddle height. If your seatpost has setback be mindful of that as well because setback is another variable in the overall equation.

Iride01 is also correct that gearing and crank length can also cause knee pain. Higher cadence in an easier gear can sometimes relieve knee pain if you are regularly grinding away in a hard gear. And cranks that are too long (which I beleve is an issue that most people have, whether they experience pain or not) can absolutely cause knee pain/discomfort. The pain usually happens at the top of the pedal stroke because the long crank creates a knee angle that is too sharp. And if the knee angle is too sharp at the top of the pedal stroke it can also cause hip impingement issues. Shorter cranks can be a great solution to this problem.

So, long-story short... when you really dig into seat height it's complicated! But in order to keep it manageable without getting lost in the weeds I'd start with getting the saddle height correct using the "heel on pedal" method. From there you can make small adjustments via trial and error and you'll most likely achieve a noticeable improvement.