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Sean from Tracker Software shows how to add watermarks to documents using PDF Exchange Editor. Watermarks are useful for protecting documents, indicating ownership, and preventing counterfeiting. On the Organize tab, click on the Watermarks dropdown and select Add to open the Add Watermark dialog box. You can choose to use an image file or custom text for the watermark, with options to customize the font, alignment, and use macros. This allows for easy customization and personalization of watermarks in documents.