Incorrect :NEW syntax
You were nearly there with your code. Fixed trigger below:

CREATE OR REPLACE TRIGGER add_item_in_order AFTER INSERT ON order_item
REFERENCING OLD AS old NEW AS new
FOR EACH ROW
BEGIN
UPDATE orders
SET total = total + (:NEW.quantity * (SELECT cost FROM watches WHERE id_watch = :NEW.id_watch))
WHERE orders.id_order = :NEW.id_order;
END;