Here's a write up of setting the timing on the TR3 engines that I posted many moons ago. I would suggest doing this procedure first, and then make your adjustments afterwards using the knurled wheel, as you will then know exactly where you're at.
TR3 timing is supposed to be set statically...without the engine running.
The procedure as I do it...Make sure your points are set to spec first. This is alway important whenever setting the timing, as a change in in the point specs affects the timing.
1. On the side of the distributor is a knurled nut that is used to advance and retard the timeing. You will see an A and an R with an arrow. There are also graduations there. One of the graduations is longer then the rest. That's the midpoint...set the timing adjuster there.
2. Bring the engine up to the timing mark on the pulley by turning the engine clockwise as looking from the front. If you go by it, don't back off. Go around again, as you don't want to introduce timing chain slop into this. Now the engine is at TDC.
3.Loosen the clamp on the dizzy.
4. Hook up a test light or voltmeter to the point side of the coil, and turn on the ignition.
5. If the test light is on, turn the dizzy CCW until the light goes out, and then turn it back (CW) until it just goes on.
If the test light is out, turn the dizzy CW until it just goes on.
6.Tighten the dizzy clamp.
7.Turn the knurled nut in the advance direction 2 graduations. Each gaduation is two degrees.
Timing is now set for 4 deg BTDC. You can use the knurled nut to make any running adjustments now, and always know where your timing is set.