The videos Coolmate posted definitely help, but here's an explanation if you don't want to watch them
Hello!
Yes so I'm struggling to understand how the internal ranking and external marks are used to calculate the overall ATAR.
For example if you're ranked 3rd in your internal exams does that mean you receive the 3rd external mark?
That's pretty much the gist of it. You're ranked internally with your internal marks. Your cohort's external marks will be realigned to better reflect your cohort's internal mark distribution, but not match it - after this, your actual HSC mark will be averaged with the mark you receive that corresponds with your rank (ie. the 3rd highest realigned external mark - if you're ranked 3rd). In theory, none of this matters if you all end up getting the same mark in the final exam or if there is only one student - so aim to get the best out of everybody in your year!
If there's anything else that doesn't quite sit right feel free to ask again