The above is a photo of a bag I have started to make (more on that later) and it occurred to me that it might be worth showing how I start a circle. I'm sorry the photos that follow are not perfect - it is hard to hold the work with one hand and the camera with the other!
To make things easier to see I am using a thick yarn and large needles.
Start by laying the yarn over your left hand with the end at the bottom front.
Take the yarn over the back of the hand and up to the top again. You now have two strands over the front of your hand and are going to work over them both.
Pull the loop under both hand threads so you have just that loop on the needle.
Now pick up another loop of new thread.
Take that loop through the loop you already have on the needle (dropping that first loop).
One stitch complete!
Here you see the first stitch and the second loop on the needle.
Pick up another loop.
Pull that through that second loop. Now you have two completed stitches on the needle.
Now you can pull on the free end of thread and start snugging the centre.
Now you can divide the stitches between your needles and finish snugging up the centre.