What year are you in? Im not sure how this is illustrated in the game, but in the beginning of the war, the torpedoes were "unstable", due to problems with the magnetic detonators (and the depth-keeping system). IRL, The kriegsmarine only conducted one (!) live test a year with the torpedoes, to see if they behaved as they should..
I always use impact settings early in the war, and speed set to fast. I also set the depth to a couple of meters above the given draft of the ship. IE; a ship with a draft at 7 meters, result in a torpedosetting at 4-5 meters. This works for me,mate!
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