“Long story short” - you can go based on your characters current “experience” which is found in the skill menu. Each time a character levels up, they are granted +5 to their class proficiencies which has a direct impact on how well your character can perform in combat.
Weapon skills are the same, but slightly different in the way that the character is granted a +5 max level cap to all it’s learned weapon proficiencies, such as: Two-Handed Swords. Thus you need to level up said proficiency by using it in combat long enough to be granted +1, until you reach your characters current cap.
Then there’s the 5 level sweet spot, which starts at level 3. In which you’ll get a fair amount of xp and reward if you engage in questing and combat against mobs that are your current level, and then two levels below, and two levels above, and this will be displayed by the mobs level number appearing as “yellow”
Any mob lower than that, will either appear as green or grey. A green mob will provide reduced amounts of experience, but will be easier to defeat. A grey mob will be a none-challenge encounter and provide no experience.
The green level range shifts as you get higher in levels, meaning that mobs turn grey at around 6-7 levels lower than you at the start, but when you reach level 60, you will encounter mobs that are still green while being 12 levels lower than you.
For safety reasons, I would recommend grinding and questing on green levels, and never attempt quests that are 3 levels higher or more. That’s when you begin to encounter issues, since the mobs are designed in such a way that their defensive stats will lower the players ability to hit, while also reducing the players average damage amount when you fight mobs that are 3 levels or higher, and this reduction amount gets worse the higher it goes.
Orange mobs (3-4 levels higher than your character) are difficult to kill because of the reduction, but they are still manageable. Mobs that are 5 levels higher and beyond will simply be too big of a gap between your characters max skill level potential, and the mobs defensive stats, which means you’ll land significantly fewer attacks, with an overall damage reduction to all your abilities.
This of course includes the mechanic known as “crushing blows” which mobs will be able to land and that only happens when you fight mobs that are 3+ levels higher than yourself. They’re not as powerful as a crit, but they still deal a nasty amount of damage, and the chance of being hit by a crushing blow also gets more likely, the higher the mob is compared to your character. This is based on your characters defensive stat, which follows the same rules as the weapon proficiencies.
I’ve gathered this information by myself, over many years of playing the game, and thus I don’t base this on any spreadsheet that has all the math calculations ironed out. But I hope you find this information to be least somewhat useful…