Complete 8 stages by defeating your enemie two times in every round. Before you start with arcade I think it's smart to edit a character you like and give him extra protection and better weapons so you can't be hurt that easy.
Then go trough the stages, defend yourself when the other guy is making his move but make sure to quickly beat him when their thing is done.
You can retry a stage over and over again, so don't worry if you don't make it in one time, it will still unlock if you keep retrying. Just don't quit ;)