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Moving Existing Games.
I've been running Steam and the respective games from a 1TB WD HDD (USB 3), for ~18 months, and haven't had any issues thus far, however "It is not recommended that you install Steam / Games to an external hard drive due to potential performance issues."
Bad-Motha, I would do that, except I had the bright idea of getting a gaming laptop instead of putting together my own desktop. On one hand, it's really easy to go to LAN parties; on the other, no upgrading >_> .
Ensure drive is awakened before launching Steam Client to ensure any games installed their are properly recognized.
1TB WD Elements USB 3.0, got it for I think $60 on a sale online.
It really depends on what you're comfortable with.
I've used externals for ages, and while there is a difference it really isn't THAT much in most of the cases by far.
For the future, OP, on top of what's already been said, if you find yourself needing to move game files around in future, I';d strongly recommend GameSaveManager which has a facility in it called SteamMover (or something like that). It moves the requisite game files AND does all the links too, so nothing extra is required.