diff --git a/frontend/public/locales/en-US/translation.json b/frontend/public/locales/en-US/translation.json
index 00cfe7265..c3bf98080 100644
--- a/frontend/public/locales/en-US/translation.json
+++ b/frontend/public/locales/en-US/translation.json
@@ -1761,13 +1761,24 @@
         "selected": "Selected: {{filename}}"
       },
       "fontSize": "Font Size",
-      "position": "Position",
+      "alphabet": "Font/Language",
+      "color": "Watermark Color",
       "rotation": "Rotation (degrees)",
       "opacity": "Opacity (%)",
       "spacing": {
         "width": "Width Spacing",
         "height": "Height Spacing"
-      }
+      },
+      "convertToImage": "Convert result to image-based PDF",
+      "convertToImageDesc": "Creates a PDF with images instead of text (more secure but larger file size)"
+    },
+    "alphabet": {
+      "roman": "Roman/Latin",
+      "arabic": "Arabic",
+      "japanese": "Japanese", 
+      "korean": "Korean",
+      "chinese": "Chinese",
+      "thai": "Thai"
     },
     "positions": {
       "topLeft": "Top Left",
diff --git a/frontend/src/components/tools/addWatermark/WatermarkContentSettings.tsx b/frontend/src/components/tools/addWatermark/WatermarkContentSettings.tsx
new file mode 100644
index 000000000..872bc1d23
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkContentSettings.tsx
@@ -0,0 +1,80 @@
+import React, { useRef } from "react";
+import { Stack, Text, TextInput, FileButton, Button, NumberInput } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+
+interface AddWatermarkParameters {
+  watermarkType?: 'text' | 'image';
+  watermarkText: string;
+  watermarkImage?: File;
+  fontSize: number;
+  rotation: number;
+  opacity: number;
+  widthSpacer: number;
+  heightSpacer: number;
+  position: string;
+  overrideX?: number;
+  overrideY?: number;
+}
+
+interface WatermarkContentSettingsProps {
+  parameters: AddWatermarkParameters;
+  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
+  disabled?: boolean;
+}
+
+const WatermarkContentSettings = ({ parameters, onParameterChange, disabled = false }: WatermarkContentSettingsProps) => {
+  const { t } = useTranslation();
+  const resetRef = useRef<() => void>(null);
+
+  return (
+    <Stack gap="md">
+      {/* Text Watermark Settings */}
+      {parameters.watermarkType === 'text' && (
+        <Stack gap="sm">
+          <Text size="sm" fw={500}>{t('watermark.settings.text.label', 'Watermark Text')}</Text>
+          <TextInput
+            placeholder={t('watermark.settings.text.placeholder', 'Enter watermark text')}
+            value={parameters.watermarkText}
+            onChange={(e) => onParameterChange('watermarkText', e.target.value)}
+            disabled={disabled}
+          />
+          
+          <Text size="sm" fw={500}>{t('watermark.settings.fontSize', 'Font Size')}</Text>
+          <NumberInput
+            value={parameters.fontSize}
+            onChange={(value) => onParameterChange('fontSize', value || 12)}
+            min={8}
+            max={72}
+            disabled={disabled}
+          />
+        </Stack>
+      )}
+
+      {/* Image Watermark Settings */}
+      {parameters.watermarkType === 'image' && (
+        <Stack gap="sm">
+          <Text size="sm" fw={500}>{t('watermark.settings.image.label', 'Watermark Image')}</Text>
+          <FileButton
+            resetRef={resetRef}
+            onChange={(file) => onParameterChange('watermarkImage', file)}
+            accept="image/*"
+            disabled={disabled}
+          >
+            {(props) => (
+              <Button {...props} variant="outline" fullWidth>
+                {parameters.watermarkImage ? parameters.watermarkImage.name : t('watermark.settings.image.choose', 'Choose Image')}
+              </Button>
+            )}
+          </FileButton>
+          {parameters.watermarkImage && (
+            <Text size="xs" c="dimmed">
+              {t('watermark.settings.image.selected', 'Selected: {{filename}}', { filename: parameters.watermarkImage.name })}
+            </Text>
+          )}
+        </Stack>
+      )}
+    </Stack>
+  );
+};
+
+export default WatermarkContentSettings;
\ No newline at end of file
diff --git a/frontend/src/components/tools/addWatermark/WatermarkStyleSettings.tsx b/frontend/src/components/tools/addWatermark/WatermarkStyleSettings.tsx
new file mode 100644
index 000000000..95aa7e4a3
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkStyleSettings.tsx
@@ -0,0 +1,117 @@
+import React from "react";
+import { Stack, Text, NumberInput, Select, ColorInput, Checkbox } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+
+interface AddWatermarkParameters {
+  watermarkType?: 'text' | 'image';
+  watermarkText: string;
+  watermarkImage?: File;
+  fontSize: number;
+  rotation: number;
+  opacity: number;
+  widthSpacer: number;
+  heightSpacer: number;
+  alphabet: string;
+  customColor: string;
+  convertPDFToImage: boolean;
+}
+
+interface WatermarkStyleSettingsProps {
+  parameters: AddWatermarkParameters;
+  onParameterChange: (key: keyof AddWatermarkParameters, value: any) => void;
+  disabled?: boolean;
+}
+
+const WatermarkStyleSettings = ({ parameters, onParameterChange, disabled = false }: WatermarkStyleSettingsProps) => {
+  const { t } = useTranslation();
+
+  const alphabetOptions = [
+    { value: 'roman', label: t('watermark.alphabet.roman', 'Roman/Latin') },
+    { value: 'arabic', label: t('watermark.alphabet.arabic', 'Arabic') },
+    { value: 'japanese', label: t('watermark.alphabet.japanese', 'Japanese') },
+    { value: 'korean', label: t('watermark.alphabet.korean', 'Korean') },
+    { value: 'chinese', label: t('watermark.alphabet.chinese', 'Chinese') },
+    { value: 'thai', label: t('watermark.alphabet.thai', 'Thai') }
+  ];
+
+  return (
+    <Stack gap="md">
+      {/* Text-specific settings */}
+      {parameters.watermarkType === 'text' && (
+        <Stack gap="sm">
+          <Text size="sm" fw={500}>{t('watermark.settings.alphabet', 'Font/Language')}</Text>
+          <Select
+            value={parameters.alphabet}
+            onChange={(value) => value && onParameterChange('alphabet', value)}
+            data={alphabetOptions}
+            disabled={disabled}
+          />
+
+          <Text size="sm" fw={500}>{t('watermark.settings.color', 'Watermark Color')}</Text>
+          <ColorInput
+            value={parameters.customColor}
+            onChange={(value) => onParameterChange('customColor', value)}
+            disabled={disabled}
+            format="hex"
+            swatches={['#d3d3d3', '#000000', '#ffffff', '#ff0000', '#00ff00', '#0000ff', '#ffff00', '#ff00ff', '#00ffff']}
+          />
+        </Stack>
+      )}
+
+      {/* Appearance Settings */}
+      <Stack gap="sm">
+        <Text size="sm" fw={500}>{t('watermark.settings.rotation', 'Rotation (degrees)')}</Text>
+        <NumberInput
+          value={parameters.rotation}
+          onChange={(value) => onParameterChange('rotation', value || 0)}
+          min={-360}
+          max={360}
+          disabled={disabled}
+        />
+
+        <Text size="sm" fw={500}>{t('watermark.settings.opacity', 'Opacity (%)')}</Text>
+        <NumberInput
+          value={parameters.opacity}
+          onChange={(value) => onParameterChange('opacity', value || 50)}
+          min={0}
+          max={100}
+          disabled={disabled}
+        />
+      </Stack>
+
+      {/* Spacing Settings */}
+      <Stack gap="sm">
+        <Text size="sm" fw={500}>{t('watermark.settings.spacing.width', 'Width Spacing')}</Text>
+        <NumberInput
+          value={parameters.widthSpacer}
+          onChange={(value) => onParameterChange('widthSpacer', value || 50)}
+          min={0}
+          max={200}
+          disabled={disabled}
+        />
+
+        <Text size="sm" fw={500}>{t('watermark.settings.spacing.height', 'Height Spacing')}</Text>
+        <NumberInput
+          value={parameters.heightSpacer}
+          onChange={(value) => onParameterChange('heightSpacer', value || 50)}
+          min={0}
+          max={200}
+          disabled={disabled}
+        />
+      </Stack>
+
+      {/* Output Options */}
+      <Stack gap="sm">
+        <Checkbox
+          label={t('watermark.settings.convertToImage', 'Convert result to image-based PDF')}
+          description={t('watermark.settings.convertToImageDesc', 'Creates a PDF with images instead of text (more secure but larger file size)')}
+          checked={parameters.convertPDFToImage}
+          onChange={(event) => onParameterChange('convertPDFToImage', event.currentTarget.checked)}
+          disabled={disabled}
+        />
+      </Stack>
+    </Stack>
+  );
+};
+
+export default WatermarkStyleSettings;
\ No newline at end of file
diff --git a/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx b/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx
new file mode 100644
index 000000000..438d781a6
--- /dev/null
+++ b/frontend/src/components/tools/addWatermark/WatermarkTypeSettings.tsx
@@ -0,0 +1,45 @@
+import React from "react";
+import { Button, Stack, Text } from "@mantine/core";
+import { useTranslation } from "react-i18next";
+
+interface WatermarkTypeSettingsProps {
+  watermarkType?: 'text' | 'image';
+  onWatermarkTypeChange: (type: 'text' | 'image') => void;
+  disabled?: boolean;
+}
+
+const WatermarkTypeSettings = ({ watermarkType, onWatermarkTypeChange, disabled = false }: WatermarkTypeSettingsProps) => {
+  const { t } = useTranslation();
+
+  return (
+    <Stack gap="sm">
+      <Text size="sm" fw={500}>{t('watermark.settings.type', 'Watermark Type')}</Text>
+      <div style={{ display: 'flex', gap: '4px' }}>
+        <Button
+          variant={watermarkType === 'text' ? 'filled' : 'outline'}
+          color={watermarkType === 'text' ? 'blue' : 'gray'}
+          onClick={() => onWatermarkTypeChange('text')}
+          disabled={disabled}
+          style={{ flex: 1, height: 'auto', minHeight: '40px', fontSize: '11px' }}
+        >
+          <div style={{ textAlign: 'center', lineHeight: '1.1', fontSize: '11px' }}>
+            {t('watermark.watermarkType.text', 'Text')}
+          </div>
+        </Button>
+        <Button
+          variant={watermarkType === 'image' ? 'filled' : 'outline'}
+          color={watermarkType === 'image' ? 'blue' : 'gray'}
+          onClick={() => onWatermarkTypeChange('image')}
+          disabled={disabled}
+          style={{ flex: 1, height: 'auto', minHeight: '40px', fontSize: '11px' }}
+        >
+          <div style={{ textAlign: 'center', lineHeight: '1.1', fontSize: '11px' }}>
+            {t('watermark.watermarkType.image', 'Image')}
+          </div>
+        </Button>
+      </div>
+    </Stack>
+  );
+};
+
+export default WatermarkTypeSettings;
\ No newline at end of file
diff --git a/frontend/src/hooks/tools/addWatermark/useAddWatermarkOperation.ts b/frontend/src/hooks/tools/addWatermark/useAddWatermarkOperation.ts
index 9251d91d5..a5f28bc06 100644
--- a/frontend/src/hooks/tools/addWatermark/useAddWatermarkOperation.ts
+++ b/frontend/src/hooks/tools/addWatermark/useAddWatermarkOperation.ts
@@ -7,25 +7,27 @@ const buildFormData = (parameters: AddWatermarkParameters, file: File): FormData
   const formData = new FormData();
   formData.append("fileInput", file);
 
+  // Required: watermarkType as string
+  formData.append("watermarkType", parameters.watermarkType || "text");
+
+  // Add watermark content based on type
   if (parameters.watermarkType === 'text') {
     formData.append("watermarkText", parameters.watermarkText);
-  } else if (parameters.watermarkImage) {
+  } else if (parameters.watermarkType === 'image' && parameters.watermarkImage) {
     formData.append("watermarkImage", parameters.watermarkImage);
   }
 
+  // Required parameters with correct formatting
   formData.append("fontSize", parameters.fontSize.toString());
   formData.append("rotation", parameters.rotation.toString());
   formData.append("opacity", (parameters.opacity / 100).toString()); // Convert percentage to decimal
   formData.append("widthSpacer", parameters.widthSpacer.toString());
   formData.append("heightSpacer", parameters.heightSpacer.toString());
-  formData.append("position", parameters.position);
 
-  if (parameters.overrideX !== undefined) {
-    formData.append("overrideX", parameters.overrideX.toString());
-  }
-  if (parameters.overrideY !== undefined) {
-    formData.append("overrideY", parameters.overrideY.toString());
-  }
+  // Backend-expected parameters from user input
+  formData.append("alphabet", parameters.alphabet);
+  formData.append("customColor", parameters.customColor);
+  formData.append("convertPDFToImage", parameters.convertPDFToImage.toString());
 
   return formData;
 };
diff --git a/frontend/src/hooks/tools/addWatermark/useAddWatermarkParameters.ts b/frontend/src/hooks/tools/addWatermark/useAddWatermarkParameters.ts
index 4f3405221..68f31ff8a 100644
--- a/frontend/src/hooks/tools/addWatermark/useAddWatermarkParameters.ts
+++ b/frontend/src/hooks/tools/addWatermark/useAddWatermarkParameters.ts
@@ -1,7 +1,7 @@
 import { useState, useCallback } from 'react';
 
 export interface AddWatermarkParameters {
-  watermarkType: 'text' | 'image';
+  watermarkType?: 'text' | 'image';
   watermarkText: string;
   watermarkImage?: File;
   fontSize: number;
@@ -9,20 +9,22 @@ export interface AddWatermarkParameters {
   opacity: number;
   widthSpacer: number;
   heightSpacer: number;
-  position: string;
-  overrideX?: number;
-  overrideY?: number;
+  alphabet: string;
+  customColor: string;
+  convertPDFToImage: boolean;
 }
 
 const defaultParameters: AddWatermarkParameters = {
-  watermarkType: 'text',
+  watermarkType: undefined,
   watermarkText: '',
   fontSize: 12,
   rotation: 0,
   opacity: 50,
   widthSpacer: 50,
   heightSpacer: 50,
-  position: 'center'
+  alphabet: 'roman',
+  customColor: '#d3d3d3',
+  convertPDFToImage: false
 };
 
 export const useAddWatermarkParameters = () => {
@@ -40,6 +42,9 @@ export const useAddWatermarkParameters = () => {
   }, []);
 
   const validateParameters = useCallback((): boolean => {
+    if (!parameters.watermarkType) {
+      return false;
+    }
     if (parameters.watermarkType === 'text') {
       return parameters.watermarkText.trim().length > 0;
     } else {
diff --git a/frontend/src/tools/AddWatermark.tsx b/frontend/src/tools/AddWatermark.tsx
index dc549745d..4ef37625d 100644
--- a/frontend/src/tools/AddWatermark.tsx
+++ b/frontend/src/tools/AddWatermark.tsx
@@ -1,4 +1,4 @@
-import React, { useEffect, useMemo } from "react";
+import React, { useEffect, useMemo, useState } from "react";
 import { Button, Stack, Text } from "@mantine/core";
 import { useTranslation } from "react-i18next";
 import DownloadIcon from "@mui/icons-material/Download";
@@ -12,7 +12,9 @@ import ErrorNotification from "../components/tools/shared/ErrorNotification";
 import FileStatusIndicator from "../components/tools/shared/FileStatusIndicator";
 import ResultsPreview from "../components/tools/shared/ResultsPreview";
 
-import AddWatermarkSettings from "../components/tools/addWatermark/AddWatermarkSettings";
+import WatermarkTypeSettings from "../components/tools/addWatermark/WatermarkTypeSettings";
+import WatermarkContentSettings from "../components/tools/addWatermark/WatermarkContentSettings";
+import WatermarkStyleSettings from "../components/tools/addWatermark/WatermarkStyleSettings";
 
 import { useAddWatermarkParameters } from "../hooks/tools/addWatermark/useAddWatermarkParameters";
 import { useAddWatermarkOperation } from "../hooks/tools/addWatermark/useAddWatermarkOperation";
@@ -65,7 +67,65 @@ const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) =>
   const hasFiles = selectedFiles.length > 0;
   const hasResults = watermarkOperation.files.length > 0 || watermarkOperation.downloadUrl !== null;
   const filesCollapsed = hasFiles;
-  const settingsCollapsed = hasResults;
+  
+  // Step completion logic  
+  const typeStepCompleted = hasFiles && !!watermarkParams.parameters.watermarkType;
+  const contentStepCompleted = typeStepCompleted && (
+    (watermarkParams.parameters.watermarkType === 'text' && watermarkParams.parameters.watermarkText.trim().length > 0) ||
+    (watermarkParams.parameters.watermarkType === 'image' && watermarkParams.parameters.watermarkImage !== undefined)
+  );
+  const styleStepCompleted = contentStepCompleted; // Style step has defaults, so completed when content is done
+  
+  // Track which steps have been manually opened
+  const [manuallyOpenedSteps, setManuallyOpenedSteps] = useState<Set<string>>(new Set());
+  
+  // Auto-collapse logic with manual override
+  const typeStepCollapsed = typeStepCompleted && !hasResults && !manuallyOpenedSteps.has('type');
+  const contentStepCollapsed = contentStepCompleted && !hasResults && !manuallyOpenedSteps.has('content');
+  const styleStepCollapsed = !manuallyOpenedSteps.has('style'); // Style starts collapsed, only opens when clicked
+  
+  // Click handlers to manage step visibility and reset results
+  const handleTypeStepClick = () => {
+    setManuallyOpenedSteps(prev => {
+      const newSet = new Set(prev);
+      if (newSet.has('type')) {
+        newSet.delete('type'); // Close if already open
+      } else {
+        newSet.add('type'); // Open if closed
+      }
+      return newSet;
+    });
+    watermarkOperation.resetResults();
+    onPreviewFile?.(null);
+  };
+  
+  const handleContentStepClick = () => {
+    setManuallyOpenedSteps(prev => {
+      const newSet = new Set(prev);
+      if (newSet.has('content')) {
+        newSet.delete('content'); // Close if already open
+      } else {
+        newSet.add('content'); // Open if closed
+      }
+      return newSet;
+    });
+    watermarkOperation.resetResults();
+    onPreviewFile?.(null);
+  };
+  
+  const handleStyleStepClick = () => {
+    setManuallyOpenedSteps(prev => {
+      const newSet = new Set(prev);
+      if (newSet.has('style')) {
+        newSet.delete('style'); // Close if already open
+      } else {
+        newSet.add('style'); // Open if closed
+      }
+      return newSet;
+    });
+    watermarkOperation.resetResults();
+    onPreviewFile?.(null);
+  };
 
   const previewResults = useMemo(() =>
     watermarkOperation.files?.map((file, index) => ({
@@ -96,22 +156,62 @@ const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) =>
           />
         </ToolStep>
 
-        {/* Settings Step */}
+        {/* Watermark Type Step */}
         <ToolStep
-          title="Settings"
+          title="Watermark Type"
           isVisible={hasFiles}
-          isCollapsed={settingsCollapsed}
-          isCompleted={settingsCollapsed}
-          onCollapsedClick={settingsCollapsed ? handleSettingsReset : undefined}
-          completedMessage={settingsCollapsed ? "Watermark added" : undefined}
+          isCollapsed={typeStepCollapsed}
+          isCompleted={typeStepCompleted}
+          onCollapsedClick={handleTypeStepClick}
+          completedMessage={typeStepCompleted ? 
+            `Type: ${watermarkParams.parameters.watermarkType === 'text' ? 'Text' : 'Image'}` : undefined}
         >
-          <Stack gap="sm">
-            <AddWatermarkSettings
-              parameters={watermarkParams.parameters}
-              onParameterChange={watermarkParams.updateParameter}
-              disabled={endpointLoading}
-            />
+          <WatermarkTypeSettings
+            watermarkType={watermarkParams.parameters.watermarkType}
+            onWatermarkTypeChange={(type) => watermarkParams.updateParameter('watermarkType', type)}
+            disabled={endpointLoading}
+          />
+        </ToolStep>
 
+        {/* Content Step */}
+        <ToolStep
+          title={watermarkParams.parameters.watermarkType === 'text' ? "Text Content" : "Image Content"}
+          isVisible={typeStepCompleted}
+          isCollapsed={contentStepCollapsed}
+          isCompleted={contentStepCompleted}
+          onCollapsedClick={handleContentStepClick}
+          completedMessage={contentStepCompleted ? 
+            (watermarkParams.parameters.watermarkType === 'text' 
+              ? `Text: "${watermarkParams.parameters.watermarkText}"` 
+              : `Image: ${watermarkParams.parameters.watermarkImage?.name}`) : undefined}
+        >
+          <WatermarkContentSettings
+            parameters={watermarkParams.parameters}
+            onParameterChange={watermarkParams.updateParameter}
+            disabled={endpointLoading}
+          />
+        </ToolStep>
+
+        {/* Style Step */}
+        <ToolStep
+          title="Style & Position (Optional)"
+          isVisible={contentStepCompleted}
+          isCollapsed={styleStepCollapsed}
+          isCompleted={styleStepCompleted}
+          onCollapsedClick={handleStyleStepClick}
+          completedMessage={styleStepCompleted ? 
+            `Opacity: ${watermarkParams.parameters.opacity}%, Rotation: ${watermarkParams.parameters.rotation}°` : undefined}
+        >
+          <WatermarkStyleSettings
+            parameters={watermarkParams.parameters}
+            onParameterChange={watermarkParams.updateParameter}
+            disabled={endpointLoading}
+          />
+        </ToolStep>
+
+        {/* Apply Button - Outside of settings steps */}
+        {styleStepCompleted && !hasResults && (
+          <Stack gap="sm" p="md">
             <OperationButton
               onClick={handleAddWatermark}
               isLoading={watermarkOperation.isLoading}
@@ -120,7 +220,7 @@ const AddWatermark = ({ onPreviewFile, onComplete, onError }: BaseToolProps) =>
               submitText="Add Watermark and Review"
             />
           </Stack>
-        </ToolStep>
+        )}
 
         {/* Results Step */}
         <ToolStep