Forging is fun. Steel needs to be hot forged but iron can be cold forged, needing only to be annealed when hammering has hardened it.
Common nails are made of iron, (or of mild steel in this case you must anneal them when you feel they are getting harder to hammer) ; any nail, around 3 inches long, can be turned into a small knife. Old bent nails cost nothing so you can try and make different shapes at no cost. Annealing means bringing the steel to a red-heath temperature and letting it air-cool.

Step 1: WHAT YOU NEED

You need a hammer, a lump of steel for an anvil (a sledge hammer head will do), a stump, a flame, a couple of pliers, and a file.

Step 2: Bend the Nail

1) The blade has to be thinner on the cutting edge and thicker on the back, but the edge that gets thinner becomes longer because the squeezed metal must find space anywayand your blade would bend upwards.
To prevent it you first slightly bend the blade then hammer the inside of the curve.

2) Blow after blow you will see the blade straightening. The point of the nail gets the right shape by itself if you hammer it evenly.

3) The stake you’re hammering on had better be a bit rounded since you have to “pinch” the edge of the blade.

Step 3: Round Off the Head

4) Now you can round off the head of the nail, hammering it on edge. As the diameter of the head diminishes, a protruding edge develops on both sides of the head.

5) Tuck in this edge bending it down.

Step 4: The Shank

6) Now you flatten the part of the nail between the head and the blade to make the shank. Try and keep the nail's head out of the stake.

7) After flattening it, the shank is hardened: to soften it you must bring it to red heath with a flame and let it air-cool.

8) Now you hold the shank with two pliers and twist it.

9) Some hammer blows on the twist will straighten it. Now you have a small handle with a good grip.

Step 5: Finishing

10) Hammer work is over, notice the colour changes from black where the iron was heated, to blue and yellow. Now you can file the blade to sharpen it and do a bit of filing on the shank.

11) If you want you can hone the cutting edge and go over the rest of the knife with different grades of abrasive paper.

12) Your raw material costs nothing (old and bent nails), forging a small knife is a question of minutes: there's plenty room for experiments with different shapes and sizes. Enjoy yourself!
PS. To see more tutorials on metalwork go to my site www.pennabilli.org