First things first. You'll need a few things: a timing light, a distributor wrench or a ratchet and socket that will fit the distributor hold down bolt, and a little know how.
The first thing you'll have to do is disconnect the spout connector. Make sure the car is off when you do this. On 87-93 cars its at the end of a wire that is hanging near the distributor. On 94-95's its near one of the strut towers. The reason you disconnect the spout connector is so the computer doesn't automatically change the timing when you move the distributor, which will let you set the base timing. Oh and whatever you do....Don't lose the spout connector.
Next you'll have to connect the timing light. With most lights you have to connect the positive and negative clips onto the positive and negative terminals on the battery. Then you clip the inductive lead of the timing light onto the number one (1) spark plug wire. If you don't happen to know which one that is on a Mustang, then I'll tell you. If you are standing in front of the car looking at the engine its the first spark plug wire on the left side of the engine.
The next thing you will need to do is start the car. Before you do so there are a few things to look out for. First make sure there aren't any wires hanging near the belts, pulleys or fan. You'll also want to check to make sure you can see the actual timing marks on the harmonic balancer. Some times is easier to get some whiteout and crawl under the car and mark where you'd like the timing to be set at, such as 14 degrees.
Before you start the car, loosen the distributor hold down bolt. Don't take it all of the way out, just loosen it a little. If you take it all of the way out the distributor gear may skip timing when you start the car up, which isn't a good thing. Now start the car, and point the timing light at the timing marks and pull the trigger (if it has one). You should see the light flashing on and off, and you should be able to see the timing marks, or the one mark that you made with the whiteout. Be careful, don't let the timing light, or even worse your hands get caught in the belts or hit with the fan.
While holding the base of the distributor (not the top near the plug wires) turn it very slowly until you get the timing where you want. Then tighten the distributor hold down bolt and re-check the timing to make sure the distributor didn't move. Don't forget to re-connect the spout connector too.
There you go! You're all set!!! There are a few things you should know. Ford set the timing at 10 degrees from the factory so you could use low octane fuel. If you bump up your timing then you'll need to use a higher octane fuel, usually 92 octane. Although I've seen and heard of people running 18 degrees of timing without having trouble its really not recommended. When you set your timing too high your engine will ping, which will cause bad things to happen like blown pistons.
Try setting your timing at 13 and take a ride. If it doesn't ping then you can try setting it higher, but once it starts to ping turn it back down a degree or two. Basically what we are saying is "be careful", if you don't under stand any of this have someone who does help you.