Arrows effectively make your player more versatile.
For example if you like to use a DMC, but your opponent doesn't have an AMC, you can put a blue arrow on him to make him act as a DC, or a Red arrow on him to make him act like an MC.
Note, using arrows isn't as effective as using the proper player for the role you're trying to create, but it helps.
I always put red arrows on my AMR/AML as I attack down the flanks.
Plus, if you're using a player in a position that the opponent has no counter player, stick a red arrow on him and he'll exploit this.
Eg, if your opponent is playing a narrow diamond, with no flanking midfielders, and you're playing a 4-4-2, stick red arrows on your wingers.
If you're playing a DMC and your opponent doesn't have an AMC, but 3 ST, then stick a blue arrow on him to reinforce your defence.
That's just my logic anyway, it's served me well, hope it helps.