When I started making folding knives I was using a dremel with a cutoff disc to cut my nail nicks. The results worked ok but the final results didn't look the part. To get an acceptable looking nail nick I started milling my nail nicks in with a flycutter bit. Cutting the nail nick with a flycutter must be done before heat treatment whilst the blade is annealed before grinding the bevels. The final shape of the nail nick will be determined by the length of the flycutter bit and its shape. A longer bit will make a wide narrow nick and a short bit will make a short fat nick. The shape of the bit will also effect the final shape of the nick, mine is shown below. Click for larger images.