You have made what we call an electromagnet. When you disconnect the wire, the nails fall off. This is one of the advantages of an electromagnet. We can turn magnetism on and off as we wish. Picture a crane operator throwing the switch and picking up scrap iron and steel. Then he opens the switch to drop the scrap metals.
Soft iron can be magnetized easily as you have just seen, but loses its magnetism in a short time. Steel is harder to magnetize but holds its magnetism almost indefinitely.
Make a Permanent Magnet
Wrap the insulated bell wire around the steel knitting needle. The wire should be wrapped the full length of the needle. One end of the wire is connected to the battery. The other end of the wire is then touched for just a few seconds to the other terminal. This should make the needle into a permanent bar magnet. If you did not get results, try two batteries in series, wind more turns of wire on the needle, and leave it connected a little longer. Do the same thing with the second knitting needle. In the same way, you can magnetize a screwdriver, so that you can use it to pick up and hold steel screws. Don't do it unless you want your screwdriver to be magnetized.
Figure 3
See How They Attract and Repel
Take one of the magnetized needles and hang it with a thread. A thread stirrup (Figure 4) will help keep it level. Be sure it is not near other large pieces of steel. Watch the needle. Does it settle down, pointing in one direction? (Check to see if this is the same direction as your compass). If it does, you have made a compass. The tip of the needle pointing north is called the North Pole (North-seeking pole). The other end is called the South Pole. Mark the North Pole with a stroke of the red marking pencil. Mark the South Pole black. Do the same thing with the second needle. You can show this with a sewing needle, and a notched cork, and a bowl of water. Rest the needle in the notched cork, and float it on the water.
Figure 4