Lot size is the size of a single trade, stated in lots. In foreign exchange, one standard lot controls 100,000 units of the base currency, a mini lot controls 10,000, and a micro lot controls 1,000. The lot size you choose decides how much each pip of price movement is worth in dollars.
This matters because risk is lot size multiplied by movement. On euro against the dollar, one standard lot is worth about $10 per pip, and a tenth of a lot is worth about $1 per pip. The same 50-pip move is $500 at one lot and $50 at a tenth of a lot. Position size, not market direction, is usually what breaches a loss limit.
Lot size also interacts with leverage. Leverage decides how much margin a trade needs, but the lot size decides how much money moves when price moves. A small account on high leverage can still take a large lot, and the loss will be large in dollars whatever the margin was.
The common trap is sizing by feeling instead of by the loss limit. We recommend working backwards: take the dollars you are willing to lose on the trade, divide by the stop distance in pips and the dollars per pip at your lot size, and only then place the order. Prop trading can cost you every fee you pay.