Atletico beat Real 1-0 to claim their first league win at the Santiago Bernabeu for nearly 14 years.
"We were slow in attack. We didn't have a good game. We have to recover and improve," Ancelotti told reporters.
"Losing a match at home is not easy. We need to improve a lot of things including our attitude and confidence. I have faith in my players. The problem is not our style of play, it's with our pace.
"Atletico Madrid deserved to win the game. They were organised and solid in defence. They can compete with us for the league title."
The defeat means that Real are already five points behind Barcelona and Atletico.