I'm interested, how exactly does it determine who you fight against? I seem to always end up fighting someone who is way stronger than I am.

I recall reading somewhere that it's based on the equipment you have, but it seems to be based solely on what level you are.

Which would be fine, except everyone else seems to be way stronger than me. Fights usually go one of four ways:
1.) I get absolutely crushed (as in, the opponent still has 50% or more of their health left).
2.) The opponent made a mistake, allowing me to barely win (when I should have lost by a wide margin).
3.) It was a fair match (I've got about a 50% win/loss on fair fights, which is to be expected, though most fights are either #1 or #2).

So clearly something isn't going right here. Either I'm the only player who doesn't pay to win, the matchmaking system is seriously broken or I'm just really, really bad at this game.

Also, since it might be that I'm just not playing right, is there a newbie guide out there?

You are somewhat right, matchmaking is based on the highest level of gear you have equipped. For example if you are level 30 but the highest level item you have equipped is level 22 you will fight at level 22.

have i fought you? my ign is LC at lvl 25

Are you sure that is still the case? I did a bit of a test, and when I was at level 9 I removed all the new gear I got so the highest level equipped was 6 and it still matched me at level 9. And then I lost, brutally, because I had a stripped down mech (and I wasn't expecting it to match me so quickly, I just wanted to see the dialogue box that said what level you were for matchmaking purposes).

I'm sure the highest level gear I had equipped was level 6. I checked everything twice. And even if that wasn't the case I hadn't bought any level 9 stuff yet so I shouldn't have been matched at that level anyways if it was based on gear...

EDIT: I just tried it again (same way I did before) and it matched me properly. Don't know what went wrong when I tried it before.

Does it work differently for lower levels?

The problem is (I had it before the Update) that the programm does not instantly realize that you changed the matching level. It takes some time.

The best way is to change the build, then log out and log in again.

CombatPet is right, you will either need to relog after changing gear or do a full refresh otherwise sometimes it may not pick up that your gear changed right away.

That's interesting, you'd hope it wouldn't work the other way (change to high level gear while having a lower matchmaking level)

Oh, there's also a matchmaking range in PvP battles.
The range is +/- 3lvls.
For example, if you're lvl6 then you can be matched against lvls 3-9. That explains why you're facing lvl9 build against your lvl6 build.

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Aeacus

No, that wasn't the issue. I had a level 6 build, but it started matching me at level 9 (and actually, it expanded it's search and matched me with someone who was level 10 before I was able to mentally process what was going on, so I predictably got stomped because I only had half my gear on, having stripped off everything that was higher than level 6 just to test it).