The 23-year-old from Elie, Fife, added a 75 to previous rounds of 69 and 67. She was joined at the top of the leaderboard - on a five-under-par total of 211 - by Sweden's Camilla Lennarth who fired a three-under-par 69 in gusty and changeable conditions.
Watson birdied the fourth but dropped a shot at the sixth. A double-bogey at the par-3 10th was followed by a birdie at 11 but Watson dropped further shots on 14 and 15. Lennarth had an eagle, four birdies and three bogeys on her card. Both are bidding for their first win on the Ladies European Tour and Watson said: "I'm really excited for tomorrow. This is my first year on tour and it's only my fifth LET event. To already have a chance to win is fantastic. I hope I can go out and play my best.
"It's definitely not a position I'm used to so far in professional golf, but hopefully it will be one I become comfortable with in the coming months. It will be nice to play tomorrow with this round out of the way. I learned a lot.
"Overall it was pretty solid. I had a few loose shots which cost me but it was windier today and I didn't hit it quite as well. I made life more difficult for myself but I'm still in a good position, so that's the main thing."
Two other Scots go into today's final round in the leading 20. Pamela Pretswell and Kylie Walker are both in a five-way share of 16th place on three-over 219 after rounds of 67 and 73.