The -Xmx argument defines the max memory size that the heap can reach for the JVM. You must know your program well and see how it performs under load and set this parameter accordingly. A low value can cause OutOfMemoryExceptions or a very poor performance if your program’s heap memory is reaching the maximum heap size. If your program is running in dedicated server you can set this parameter higher because it wont affect other programs.
The -Xms argument sets the initial heap memory size for the JVM. This means that when you start your program the JVM will allocate this amount of memory instantly. This is useful if your program will consume a large amount of heap memory right from the start. This avoids the JVM to be constantly increasing the heap and can gain some performance there. If you don’t know if this parameter is going to help you, don’t use it.
In summary, this is a compromise that you have to decide based only in the memory behavior of your program.