Nuno Espirito Santo's men have made an impressive start to the 2014-15 campaign, winning four and drawing two of their league outings so far to sit in second place, two points behind leaders Barcelona.
Atletico, aiming to defend the crown they won in sensational style in May, have made a similarly impressive beginning and lie third, behind Saturday's opponents on goal difference.
Alves, who has conceded just three goals in his six La Liga appearances this season, is fully aware of the threat posed by Diego Simeone's men.
"We're playing against the champions," he said. "Every game shows what we are capable of achieving this season. This is a big game, but if you don't win the other games then you might not be so high up the table.
"This is an important game against the league champions. They are the favourites but we need to be strong at home. We are taking things step by step. The season is long and difficult, and you have to keep your feet on the ground.
"They are a side who are very physical, who play at the limit of what the referee will call, and who have strong players. We have to match this. We can have a good game if we manage to counter this.
"We all have to work on this [set pieces] and get organised. It is hard to train for this, because Simeone could work on a different play in training. We need to have a perfect game in all aspects."
Atletico were unbeaten in four meetings with Valencia last season, winning three of those, but Simeone's men will have had only two full days' rest coming into the clash at the Mestalla, after their 1-0 win over Juventus in the UEFA Champions League on Wednesday.
Arda Turan struck the winner 16 minutes from time at the Vicente Calderon, and Simeone has called on all of his players to continue to share the goalscoring burden.
"The truth is that he's [Arda] having a very good year because he has scored important goals: the one against Madrid and this one," he said.
"That is what we always demand. We need goals from everyone on the team and recently it's been happening: Saul, Koke, [Raul] Jimenez, Raul Garcia, Arda... it speaks to all the effort that [Mario] Mandzukic is making up front to allow defenders to get away so the second line can move forward."
Atletico have no new injury worries ahead of the clash, although captain Gabi may be glad to return his focus to matters on the field after appearing in court in relation to a case of alleged match fixing in a clash between Levante and Real Zaragoza in 2011.
Valencia continue to be without on-loan Manchester City striker Alvaro Negredo, who has a broken metatarsal.
