formation versus formation: base positioning of players, but this is not a board game, so players move around (hence many formations can counter many formations even if the base positioning does not reflect so)
arrows: affects the movement of players, hence positioning, either to attack or to defend (seems so, but no one has been able to give a 100% accurate answer)
orders: what you think will be the most suitable to use going by the logic of football or by how this game functions (even if it goes against football logic)
All 3 depends on the your preferences, style and the strategy you want to use or think would be best for a particular situation.
Let me take an example: facing the 4-4-2.
Opponent uses 4-4-2.
Findings or guesses: he is using an attacking mentality and he attacks through the flanks
What you can do?
Block the flanks and attack the flanks.
Block the flanks and attack the middle.
Block the flanks and attack with mixed focus.
If you think or can say to a certain confidence, he has red arrows on DL and DR, you can counter-attack by the flanks as there will be space there, or you can counter-attack through the middle if he has no blue arrows on the middle MCs and DCs.
So, you chose a suitable formation that will suit the strategy you will chose based on your findings. As you can see above there are different strategies. The more information (as accurate as possible) you can have on an opponent, the better.