Do you have VQMod Installed?
if not (please install it first )

1. Put watermark.xml file into vqmod/xml folder

2. "watermark.png" file Put it in /image ( opencart image folder ).


3. After its all in place you need to delete the image cache to force open cart to re-generate the images.
Files folders in here... /image/cache/data

I'm using this in 1.5.0.5 everything happens automatically when the images are resized by opencart.