To create a custom watermark using drawing tools, first draw or insert your desired image and adjust its size. Then, right-click on the image, select "Format Picture", and find the transparency slider under the "Fill" options to make the image more transparent. Position the transparent image where you want the watermark to appear. Note that this method places the watermark on a single page; for a document-wide watermark, use the "Watermark" feature under the "Design" tab and choose "Custom Watermark" to insert your image.