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In this tutorial, Sean from Tracker Software explains how to add watermarks to documents using PDF Exchange Editor. Watermarks can be used for various purposes such as protecting documents and indicating ownership. To add a watermark, go to the Organize tab, click on Watermarks, and then Add. You can choose to use either an image file or custom text for the watermark. The preview pane will display the watermark, which can be customized with font and alignment options. Macros can also be used for further customization.