I think tracking should not be so much a magical arrow as a system used similar to Zelda: The Twilight Princess. Like a glowing line that you follow, left behind by the player that you are tracking. So if someone set's up a bounty or something, then they must specify the last seen location of said player, and you can start tracking from there.
However, tracking, much like in real life, becomes harder the longer the person tracked has been absent. The trail could fade, spot out, or completely vanish at points like rivers or patches of dense grass.
Depending on how high your tracking lev