Heidar Helguson gave the Bluebirds the lead before Forest striker Darius Henderson was sent off for elbowing the same player.
Rudy Gestede then struck twice to seal the victory that ends Forests unbeaten run at 10 games but Davies has not given up on a play-off berth.
"The run had to come to an end at some point," he said. "We have four games left and we know we need at least two wins.
"There will be plenty of movement in the coming weeks but it's the table at the end of the season that matters. It's all to play for."
Davies did not disagree with the decision to dismiss Henderson, although he did feel it looked worse than it was.
"I don't think he intentionally put his elbow up to the boy's face. I think his elbow has risen and connected with his face," added the Scotsman.
"But under the rules I don't think we can have any complaints about the red card at all. The referee had no choice."
Davies also confirmed that Greg Halford suffered cuts to his head and dizziness when he took a blow to the head from Gestede's knee early in the second half.
The defender will be assessed ahead of Tuesday's meeting with Middlesbrough at the Riverside.