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When you manage to match 5 symbols you will transfrom them into a rainbow symbol which can then be used to clear one specific colour.
Save the Princess either for the boss at the end of the level or for when you are faced with large formations as she will be able to attack the entire formation including the back row at once.
Make upgrading the priest your first priority so he is able to keep the other characters alive. Then whenever possible upgrade your bomber and gunner so you increase the amount of damage they are able to deal. Don't worry too much about upgrading the warrior as it is only used in limited situations.