Electromagnetic tracking systems are often used to track location and orientation of an implantable medical instrument in the human body. This paper presents a 3D tracking system that is based on AC magnetic field transmitting and sensing. The concept and principle to detect position and orientation are introduced. Then the tracking behaviors for different degree-of-freedom (DOF) are investigated using finite element analysis. The tracking errors on the position and orientation accuracy are presented using the equivalent dipole field model and some improving measures are proposed, especially for the tracking at close region. We can find that using the finite element analysis to simulate the mutual inductance between transmitting and sensing coils is an effective method to research the tracking behaviors.