When I mount this kind of float switch, do I drill a hole in the side of a bucket, at the bottom or mount it with threads facing up?
I am not using this in a bucket, yet Chinese are not too eager to tell the exact location of the reed switch in the body of this device and how it should be oriented to work.
That depends on the water level you want to measure. If you mount it at the bottom of the bucket then it won't take much water to make it float.
Use a multimeter to test for continuity to determine which position of the float makes the switch open or closed. With most of these types of float switches, you can remove the float from the body and flip it over to reverse the action. So if it is normally closed in the down position, take the float part off and flip it over and put it back on to make it normally closed in the up position.