The defending La Liga champions suffered their second top-flight defeat of the season to Real Sociedad immediately before the international break, and host a Malaga side who are high on confidence on Saturday.
Javi Gracia's team have won their last five La Liga outings and sit just two points adrift of fourth-placed Atletico.
And Simeone knows his side will need to be at their best if they are to bounce back from their 2-1 reverse in San Sebastian.
"We have no room for error, we must treat the game like a final," said the Argentinian.
"They have been doing well for a while.
"We can see their results and we also know they stopped Barcelona playing well [in a 0-0 draw in September].
"They have a very strong offensive unit, much technical ability and experience on the pitch."
