In Windows Live Mail, select the Folders ribbon, then click on New Folder and type the name. Afterwards, ensure that the folder was created properly in the right section and that's it. There is no other special instruction to create a folder.
Or, right click the Inbox/account, right click it and choose New Folder from there. Also, when you create a folder, it will be placed under the official folders (Inbox, Spam, Trash, etc). You can't modify that order, regardless of the steps you do.