What is the best position for Apple Watch to track temperature?

You would have to have an Apple Watch 8 or newer, to get an estimate for that:

Receive retrospective ovulation estimates on Apple Watch - Apple Support

Track your nightly wrist temperature changes with Apple Watch - Apple Support

And you should wear the watch as usual on top of your wrist.

Wearing your Apple Watch - Apple Support

Sorry for the misunderstanding, but your profile above mentions the Apple Watch 3 and watchOS 8.

I would not change the position of the watch, this might also lead to different readings for Sleep Tracking, Heart rate, oxygen levels, etc.

As a male user, I just need temperature readings to check the general health, which works perfectly fine wearing the watch normally.

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How retrospective ovulation estimates work

Apple Watch Series 8 or later, and all Apple Watch Ultra models, use wrist temperature data to detect the biphasic shift, which is an increase in temperature that often occurs after ovulation. Advanced algorithms use wrist temperature data and logged cycle data to estimate the day ovulation likely occurred.

Get the best results

• Accurately log your period in Cycle Tracking.
• Wear your Apple Watch to sleep each night with Sleep Focus enabled.
• Make sure your Apple Watch fits just right. The band should be snug but comfortable, and the back of your Apple Watch needs to be touching your wrist.
• Wear your Apple Watch Series 8 or later, or any model of Apple Watch Ultra, regularly for at least 2 cycles to gather nightly wrist temperature data. If your watch is repaired, or if you pair and use a new watch, you'll need to wear your new watch for at least 2 cycles to receive a new ovulation estimate.

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copied from: Receive retrospective ovulation estimates on Apple Watch - Apple Support

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Things you should know

• The temperature sensing feature is not a medical device and is not intended for use in medical diagnosis, treatment, or for any other medical purpose.
• The temperature sensing feature is not a thermometer and cannot provide wrist temperature measurements on-demand.
• The temperature sensing feature is designed for users who are at least 14 years old.
• Wrist temperature data can also be impacted by certain physiological, lifestyle, and environmental factors.
• To get the best results, make sure your Apple Watch fits just right. If the fit is too loose, it can impact wrist temperature data.

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copied from: Track your nightly wrist temperature changes with Apple Watch - Apple Support

You're welcome 🙂