"We're two of the teams that are up there," 31-year-old Taylor told BBC Three Counties Radio.
"We feel we deserve to be around about the top six but we've got a lot of work to do still."
The result means Watford have now gone three league games without a win, leaving them six points adrift of the play-off zone but with two games in hand on most of their rivals.
And Taylor says his team-mates should take the positives from pushing a Forest side, who have won their last six league games, all the way.
Credit to your team, played some good attacking football, as did we and you didn't sit behind the ball all game as most teams have done at the CG this year
AshleyNFFC
"It's about taking confidence from games like that. Forest knew they were going to have a tough game and we didn't disappoint them," he said.
"It's no disgrace by any means but I feel it was a missed opportunity to put another stamp on this division."
Meanwhile, Watford will monitor the fitness of left-back Lloyd Doyley, who injured a hamstring against Forest, ahead of Saturday's home clash with Burnley.
"He felt a tightness, I thought he stuck to his task so well," explained Hornets boss Malky Mackay.
"In the second half he felt a tightness in the hamstring. We'll assess that and see how it is. It's something we've got to look at."
Source: BBC Sport
Source: BBC Sport