Milan fell 3-1 at home after Christian Pulisic had given the hosts an early lead.
“We played against Liverpool, who are a huge team. We started well, both attacking and defending, but then we conceded two goals from set plays that changed the game,” Fonseca told Sky Italia.
“We lost our mental balance, because when the team lacks confidence, we develop problems and don’t do what we prepared in training.
“I told the players, you cannot make those mistakes in this kind of game. At the same time, I have to admit Liverpool are more of a team right now than we are, we need to keep working to have not 20 good minutes, but 70, 80, 90 minutes playing our football.
“After we conceded the second goal, the team stopped playing, and it becomes difficult after that.”
He continued: “The first goal was individual marking, we prepared that on their central defenders. That was the plan anyway.
“It was something we prepared in the little time that we had, try to put Leao against their right-back. We did it once or twice in the match. What we prepared was to send Rafa one-on-one against him and we hardly did it.”