The Scots began their qualifying campaign on Sunday night with a narrow 2-1 defeat to the world champions in Dortmund.
Following an impressive performance from Gordon Strachan's side, McFadden believes that the national team can take plenty of confidence going into their remaining qualifiers.
"I thought it was a very good performance, especially in the second half, and the fact that we're all disappointed that we never took something from the game shows how well we've done," he told Sky Sports News.
"We've got to aim higher especially after last night's performance. Germany did enough to win the game but I think we had a chance to take something from it. We've got to take the confidence going into the rest of the games and aim for second and guarantee the qualification outright."
Scotland return to Euro 2016 qualifying action on October 11 when they host Georgia.