Steps involved in Merchant's circle analysis is as follows.

Since we
know angle of resultant force at tool side, draw a line parallel to
this. On one end of this line draw shear force(Fs), magnitude and
direction of which is known. Now draw a line perpendicular to shear
force line, it will meet resultant force line at one point. You can
draw a circle assuming the intersected line as diameter of the
circle, this is known as Merchant's circle. It is shown in figure
below.