Basically you want to narrow your squad list down to the 11 players who you think have the best chance of getting a good result for you. As well as a list of subs incase things need to be changed during a match.
My first move is to identify unfit/tired players. If a player's condition is 80% or less or they are not match fit then I don't start them and often they won't even make the bench (though some may say that is a little harsh).
Once they are out of the equation and I have a list of fit players I narrow it down again by comparing form to attributes. If a player has good attributes but has been performing badly and another player with worse attributes has been performing better I'll almost always go for the player who is in form. The only exception really is when the difference in attributes is massive and I don't trust the weaker player.
That's all I really do when deciding a team to put out. I suppose if you wanted to really get into it you could use specific players to expose the oppostion's weaknesses and counter their strenghts. E.g. if they have slow defenders use fast attackers and if they have big, strong forwards use big, strong defenders.