Liverpool boss Jurgen Klopp says Watford's first goal should have been disallowed.
Goalkeeper Adam Bogdan looked uncomfortable as he dropped a corner allowing Nathan Ake to put the hosts in front.
The German was however also critical of the performance of his players as they missed an opportunity to move closer to the Top Four.
"It was a bad start to the game," Klopp is quoted as saying by the Daily Star.
"Of course the first ball from Adam Bogdan, he should keep and he drops it
"Having seen it again usually it is a foul but it is 1-0 and our reaction was really bad.
"We lost our mind and stopped playing football. The second goal was very easy, we can defend this better.
"We tried a bit in the first half and changed a bit half-time, the start to the second half was very good, we could have scored two goals, but we didn't and then the third goal. Yeah, game over.
"The first one is his [Bogdan's] fault, but then both hands on the ball, that is the goalkeeper safe, he has the ball, I think the referee didn't see it.
"It was the wrong decision but we made more wrong decisions."
