City led twice through Erling Haaland, but late goals from Brahim Diaz and Jude Bellingham turned the game around.
Stones believes a hopeful mindset is key ahead of the second leg at the Santiago Bernabeu.
“Again, a few games after the Arsenal one, I don’t know how to put it into words straight away,” stated Stones in an interview after the game.
“It’s so raw and frustrating for everyone, how we were right in the game, until so late in the game, and then two situations that happened and we end up conceding.
“It’s frustrating as a defender to come away with that result. I’m angry and frustrated is what I can say. Today we had a great opportunity to maybe go to the (Santiago) Bernabeu 2-1 up, and now we go there needing a goal just to get level.
“It’s not done. We have to stay positive which is difficult right now. Especially in the first half we were right on top. We know the quality they have and how they would come out in the second half and they did that. What happened is avoidable from us as the 11 on the pitch.
“We have got to do better and it is as simple as that. I’m the first one to hold my hands up and look at what I can do better for the next game. We have to keep a positive mentality and look forward, and we have another 90 minutes to put this right.”