Base case and alternative
Why should a market view name one likely path and one specific alternative rather than a single prediction?
In plain words
A base case is the scenario a trader expects most, written down with its reasoning. The alternative is a named second scenario with its own conditions and consequences. Both are held at once, so the position is sized for the possibility that the alternative arrives instead.
Why it matters
Markets rarely move in one straight line, and a view written as a single prediction offers no clue about what to do when it is wrong. Naming the alternative in advance defines the trigger, the expected size of the move and how the position should be sized before the week starts, rather than during it.
In a real week: ETH, week of 21 September 2020
ETH opened the week of 21 September 2020 at 371.04 and closed at 357.49, a -3.65% week inside a 20.27% range. The base case of a range with mild drift held: the close sat in the upper third of the week range at 69.6, and the best day of 2020-09-24 added 8.81% after the week low of 313.29 on 2020-09-23. The alternative, a breakdown after the worst day of -8.27% on 2020-09-21, did not arrive; ETH moved -2.31 percentage points against BTC in a week the data labels close correlation.
A common mistake
Writing the base case and dropping the alternative, or naming an alternative so vague that no trigger or size can be attached to it. A scenario that cannot be tested against the market is not an alternative.