Help me understand setting up GAIN STAGING in Cubase 8

Not really because gain staging applies to VST instruments as well but you just control them differently since they’re not coming on an input buss or through your audio interface. The video you linked is telling you one basic thing: Don’t have your tracks recorded with so much signal that you run out of headroom when adding FX, EQ and when they’re all summed together at the master fader. What he did was instead of pulling down faders to lower his mix, he simply lowered the signal level using the PRE GAIN knob (signal before it hits anything on the channel strip) so that his faders remained at the zero position on the channel. I don’t agree with this technique but it works I suppose if you’re working on projects already tracked poorly. For you though, I would make certain that you are watching the input buss in Cubase when recording your guitar and not the channel fader. You want to get the sound and signal you want from your stomp boxes routed into your audio interface. The output of your interface as it hits the input buss in Cubase should be between -18 and -12. That way, you’re getting the sound you want with plenty of headroom for mixing and summing with other tracks to the master fader. For VST instruments, you simply use the output control in that instruments editor to set the level - same concept - leave headroom. Don’t be concerned about having a waveform that is not filling up the box - that’s a rookie myth. Use your ears instead like what you’ve been doing - which is why this probably hasn’t been a huge issue for you since anything that was clipping you simply dragged the faders down. Since you weren’t clipping during the recording, you were fine but with faders pulled down to compensate.

Something to also help you out a bit would be to change the appearance of your metering in Cubase so you’re seeing red signal activity well before zero. Do this in preferences: Metering - Appearance.