Melatonin is something your brain produces that helps you maintain a regular sleep cycle. It plays a role in telling you to wake up in the morning once it gets light, and makes you tired at night when it gets dark. The supplements just give the brain a bit extra, which gives that sleepiness a bit of a kick so it's easier to fall asleep.

You wouldn't want to take it every night for weeks on end since that can (over time) decrease the amount your brain thinks it needs to produce on it's own. But it's good for nights when you want to sleep but can't, or for when your sleeping rolls out of normal hours and you want to reset it.

If it's your dreams that you're wanting to avoid you may find keeping a dream journal to be beneficial, and to practice some of the techniques people use for lucid dreaming (they're called reality checks). Whenever you encounter anxiety in waking life you would do a reality check, and that way the habit will translate into your dreams. When you do a reality check in a dream it will fail, which causes you to realize your dreaming. At that point you can choose to wake up, or you can exert control over the dream (lucid dreaming) and change whatever is happening in it.

That was how I managed to stop having flashback dreams earlier in my life.