Claudio Ranieri felt Fulham succumbed to stage fright following Javier Hernandez's contentious equaliser in the eventual 3-1 loss to West Ham.
Ryan Babel's third-minute opener was cancelled out in controversial circumstances when Mexico striker Hernandez used his hand to bundle the ball over the line.
The match official failed to spot the infringement and the Hammers quickly grabbed a second through Issa Diop, before Michail Antonio sealed the result in second-half stoppage time.
Ranieri believes the Hernandez incident underlines the importance of technology in football but conceded a lack of confidence crippled his team at London Stadium.
"For the referee, it's very difficult to see everything. VAR could make it better," Ranieri said.
"After the [equaliser] West Ham increased in confidence and we were scared. I know it's tough, but we must believe. We must continue to fight because I don't like players who give up.
"You see the goal come from handball and it creates tension, but I don't want this, we have to always fight.
9 - Fulham’s nine London derby league defeats in a row is the longest ever such losing run in Football League history by any London side. Punishment. pic.twitter.com/UiYdeNW4rc— OptaJoe (@OptaJoe) February 22, 2019
"I believe in every one of my players. They have very big hearts. They have to believe, and something will change.
"The level of confidence increases when you win and now that's a long time ago. For me it's important. They train well and this means they believe."
The Cottagers had started brightly in their search for a second win since December with January signing Babel opening his account for the club.
But they were ultimately left to bemoan an 18th league loss which leaves them eight points adrift of safety.
A hard earned points. Onwards and upwards. pic.twitter.com/hgyLm4dy7f— West Ham United (@WestHamUtd) February 22, 2019
West Ham manager Manuel Pellegrini, who criticised the home side's sluggish start, claimed the final scoreline was justified despite Hernandez's unseen handball.
"From my position on the bench I couldn't see [how the goal was scored]," Pellegrini said.
"I've seen it since and it was handball, but it was one that nobody saw very clearly at the time. I don't think it decided the game.
"We scored two more and created three or four other chances which the goalkeeper saved well."