Atomic scale simulations of the nucleation and growth of carbon nanotubes is essential for understanding their growth mechanism. In spite of over twenty years of simulation efforts in this area, limited progress has so far been made on addressing the role of the hydrocarbon growth precursor. Here we report on atomic scale simulations of cap nucleation of single-walled carbon nanotubes from hydrocarbon precursors. The presented mechanism emphasizes the important role of hydrogen in the nucleation process, and is discussed in relation to previously presented mechanisms. In particular, the role of hydrogen in the appearance of unstable carbon structures during in situ experimental observations as well as the initial stage of multi-walled carbon nanotube growth is discussed. The results are in good agreement with available experimental and quantum-mechanical results, and provide a basic understanding of the incubation and nucleation stages of hydrocarbon-based CNT growth at the atomic level.