Why on a Merged Field Only?
Does that mean you want to enable users to input say 30 characters, but the merged field can only show the first 5?
Define a calculation field as:
Left ( YourTextField ; 5 )
Put this calculation field on your layout as the merge field. (And if the reason you want to use a merge field is to make it "read only", instead of a merge field, you can make it a standard field as a calculation field cannot be edited.