I am going to be replacing the spring perches on the rear end in my 69 Mustang. I want to get the pinion angle set to the correct angle when I do this. When I installed the new transmission in the car the tail sits lower than stock so it changed the angle the engine sits at. I have been reading articles on how to set it and it seems there are 2 ways to do it. One claims you need to get the engine and trans angle and set the pinion angle parallel to it minus 2 degrees. The other one says to get the driveshaft angle and go 2 degrees down from that. What way do you feel is the best way to set it?

Yes the trans output shaft and the pinion shaft should be parallel...3p

I have mine down , the reason being is I wanted the drive shaft paralel under power ...

If your set up is 100% stock including leaf springs in a Mustang...
With the housing bare,spring perchs level, the housing face,(where the center section bolts in) will be 4 deg UP,(or 94deg)this counters the factory 5deg (trans tail down) of the stock engine?trans installation.

Now you say your engine angle is modified...

The (not) easiest way is to prep the perch area for welding,install the drop out,axles and wheels,set up assembly on springs as if you are installing it with the perchs clamped with the stock u bolts center axle left to right and drop it on the ground with full wieght on the tires. Check angle of pinion.
If your engine angles down at,say 8*(-8) at trans,then your pinion should be UP 8*,this will equel a zero angle -8 + 8 = 0,what I set mine to is -2*,example -8(engine)+6(axle)= -2.
I then tack weld the perches remove every thing and fully weld.Enjoy vide free ride.....

To make life a little easier you can check the engine angle in one of several "flat" places,the front of the crank pully,block plate front of bell housing, or carb mount,but remember on MOST street type manifolds the carb mount is angled in such a way that the carb sits level at ride hieght so if you do not read zero you need to add 4* to what ever angle reading you get at the carb pad.

Clear as mud,right?

Yes, you need full weight on the rear springs so it's at ride height. Two degrees flatter than whatever the engine angle is. If the engine sat perfectly level front to back the pinion would be down two degrees, if the engine was six degrees down in the back the pinion would face upward 4 degrees. That'd be two degrees flatter.

Thanks for the help guys. Have the housing out and all ground down. Will set it back in and get pinion angle set and welded up tomorrow.