If you have the three valve system, for normal use, you want the cold water inlet valve open, the hot water outlet valve open, and be sure to have the bypass valve closed (which ties the cold water and hot water lines together).
Normally, the T-handles will indicate the position. If the handle is parallel with the line, then it's open, and if the t-handle intersects the line, it is closed.
It's easy to confuse the open/closed positions, especially on the bypass valve, since that line is usually running vertical compared to the horizontal cold/hot water lines.
Here is a diagram for normal use vs winterization mode.