Well he's team is only 2 points worse than yours, and 3-4-1-2 isn't the best choice vs the narrow diamond, I think to play against the narrow diamond you need a DMC and 4 at the back to defend from his 2 strikers, since the 4-5-1 V is not an option giving your playing squad, your options are looking like 4-1-4-1, 4-1-3N-2 or matching him with the narrow diamond yourself, Also your team orders were off, you don't need to play ultra attacking and you certainly don't need to press the whole pitch. Also using Red Arrows on every player is not a good idea, I would only put arrows on 3/4 players max.