The Spanish champions fell 13 points behind their city rivals after losing 2-0 to Carlo Ancelotti's men.
A goal in each half from Karim Benzema and Marco Asensio cemented Real Madrid's place at the top of the table, moving eight points clear of second placed Manchester City.
"Obviously the title is race is still up for grabs," Simeone told reporters. "There's loads of games left to be played, but it's obvious that Real Madrid have a healthy lead at the moment.
"That's credit to them. But we know how the Spanish league works. It's complicated, it's long and we can't allow ourselves to just give up and think further ahead than our next opponent, which is Real Betis.
"We have a game less that we haven't played yet. And we'll have to use that to close the gap with the top. We can't think from about anything else, apart from that."
On the defeat to Carlo Ancelotti's Madrid, Simeone added: "I think it was a game that, up until the first goal, was a very level match where there were chances at either side.
"Madrid were very clinical in front of goal and we improved in the second half. We also had chances, but their goalkeeper did very well to keep them out. And from there, their second goal really was a tough blow for us. I think they won, deservedly, and they were just very clinical in front of goal.
"Well, more than anything, I think we put in another big effort and we played well with [Geoffrey] Kondogbia playing defensively as a centre-back. And the team worked collectively very well and we put in a big effort in Portugal. And today, obviously conceding a goal is painful because it comes from a situation that we talked about as a team.
"But Real Madrid are very good on the counter-attack. I like watching their football a lot, sitting deep and working well hard, and they're very good in transition, which is near to our style of play. Obviously [Carlo] Ancelotti is a very, very good manager and he's come back here to do things well and we've seen that the Spaniard."
