the diode, or rectifier, only needs to be installed on vehicles that have a factory amp gauge an NO indictator light. In this case the banded end of the diode must be toward the alternator. this keeps current from running out the alternator to the coil. if this is not installed the car will continue running.
since 86-93 mustangs have a factory amp gauge AND an indicator light, you will not need the diode. Hold on to it, and if for some reason after installation the car continues to run after the key is turned off you will install the diode on the green wire with red stripe on the stock wiring harness (diode band facing alternator)
Now, on the alternator you have 1 main post (where the main cable connects to the battery). the male pin next to it is called Pin#1, the pin beside it (farthest from the main battery post on alternator) is called Pin#2. You will not be using Pin#2.
You need to run a wire from pin#1 (closest to main battery terminal on alternator) to the green wire with red stripe on your stock wiring harness (the harness that used to plug into the stock alternator.)
thats' it. Like I said, you won't need the diode, and even though its called a '3 wire hookup' your only using 2 wires - believe it or not thats normal in our case.
once again I can't stress the overdirve pulley for the alternator (if your running underdrive pulleys)