If you are installing the Distributor, #1 cylinder must be at TDC / Top Dead Center on the COMPRESSION stroke.
If you are installing Timing chain and gears everything will be correct when you line up the dots on the 2 gears.
You did not give a year in your question. Sorry
With a 2 stroke or 2 cycle engine if the ignition timing is set too close to top dead center it can start to run backwards.
This means the timing is set to fire the spark plugs at 10 degrees before top dead center on the compression stroke.
Top dead center on an engine is defined as when the piston is farthest from the crankshaft. Bottom dead center is when the piston is closest to the crankshaft on the engine.
turn engine to top dead center on compression stroke then turn 1 quarter of an inch passed set at .005
first run number one cylinder to top dead center on the compression stroke. then set the distributer till the firing tip on the roder is pointing directly at the number 1 spark plug wire on the distributer cap.
Remove #1 spark plugRemove valve coverManually rotate engine with a socket on the crankshaft until #1 piston is at the top of its stroke and #1 intake valve is open - this is TDC
set it at top dead center the computer does the rest
only one cylinder can be at top dead center (TDC) at a time, usually this is cylinder number one. remember: on 4-cycle engines each piston reaches the top of its stroke twice, once for ignition and once for exhaust.
You will need to set No. 1 cylinder to Top Dead Center on compression stroke, usually vibration dampener will have slot in pulley to align with markings on engine block, and then ensure that camshaft sprocket time marks are also aligned appropriately.
Use your finger over the no. 1 spark plug hole & turn engine over until you feel air or it blows your finger out of hole then look at your timing marks on crankshaft pulley it should be coming up on top dead center just set the mark on your pulley on - 0- this is top dead center on compression stroke.
0 TDC / Top dead center.