The core idea of the whole thing is to tie a three-hitch mat (don't worry - I'll describe this in minute detail), and then use it as a sort of coarse hair net - with the hair in a knot underneath the knot, and the stick to hold it all in place.
Step 1: Materials used
In most photos I use, there's a DVD case for size comparison.
Step 2: Make the hitches
Finally, nudge the two bights in the middle to overlap each other. This is a Reidemeister 2 move.
Step 3: Interweave
Step 4: Double the knot
Step 5: Shaping the knot
This shaping is done by tightening the knot around itself - not too much, that'll result in too small a knot - while moving the slack through the knot by pulling the excess rope around and around through the knot until it arrives at one of the loose ends. This part can be somewhat longwinded, but I find it relaxing, and pleasant - something to make your hands do while you do something else. This knot was created while watching Cirque du Soleil and parts of the first Matrix movie!
Step 6: Fixing the knot
With paracord, there is a geniune issue with the core; it'll look horrible if you just cut the cord, so you'll want to either melt it or tie a tight knot around the end with a thinner rope. The latter method is far outside the scope of this instructable, so I'll just recommend you use a lighter (or like I did - a gas stove) and melt the end of the cord.
Subsequently, sew the ends together with the surrounding knot so that it can't slip. I just used black cotton thread and an ordinary sharp sewing needle for this.
And then, finally, to make sure that these melted blobs aren't visible while you wear the ornament. Again, I use black cotton thread and a sewing needle to just sew the very ends together underneath a well-hidden part of the knot.