The setup needs to be clamped to the disc hub and the indicator needs to read off the spindle end in the axial direction. I was fortunate to borrow a good dial and magnetic base when I set mine. The spec of 0.01 to 0.02 mm is rather difficult to do by feel. I couldn't feel any play when it was set correctly.
Edit: Why is this post out of sync? It should come right after the third nthach post.
95 E320 Cabriolet, 131K