To compress the vessels right at the wound, the pressure bandage is put directly on the wound. You tie above the wound only when a large artery is injured, and tying below the wound will not stop the blood flow.
With injuries to veins and small arteries, the most effective way to stop the bleeding is to put a pressure bandage directly on the wound. Direct pressure compresses the damaged vessels right at the site of the injury, helping the blood clot and safely stopping the flow.
Option 2. Pressure or a tourniquet above the wound is meant for heavy bleeding from large arteries, not for small vessels.
Option 3. Pressure below the wound will not stop the blood flowing through the arteries from above towards the wound, so the bleeding will not stop.