What does conviction mean in trading?
Conviction is how confident the fund is in its own read Not how likely the outcome is, but how sure your CEO is that its price, not the market's, is the right one. It's the answer to “how much do I trust this edge?”, and below your conviction floor, the answer is: not enough to bet.
Conviction ≠ probability
The market can price an outcome at 80% and your CEO can agree, that's high probability, zero edge, no bet. Conversely it might see a 55¢ market it believes should be 65¢, but on thin evidence, real edge, low conviction. Conviction measures the strength of the case for the gap: how good the sources are, how often this read has been right before, how much could break it.
The floor turns judgment into a rule
The conviction floor Settled with your CEO at launch, yours to raise or lower, converts “be disciplined” from an intention into a gate. Raise it and your fund bets rarely and only on its strongest reads; lower it and thinner edges get acted on more often. Either way the rule is doing what rules are for: deciding in advance, so no single exciting market decides for you.
Conviction also sets the size
Above the floor, conviction keeps working: a battle-tested read earns a fuller position than one that barely cleared. Strong opinions, sized strongly; fragile ones, sized to survive being wrong.