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This question already has an answer here:

I need to install windows 7 (or windows server 2008 r2) on a USB harddisk, is it possible ?

I want to be able to select a partition on the USB drive as a possible location for installation (or something similar)

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marked as duplicate by Karan, Kaze, Mokubai, Dave, Tog Mar 15 '13 at 11:42

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

up vote 2 down vote accepted

There should be no issues, as long as Windows setup can find the drive.

It is possible, however that you may get this error:

enter image description here

To get around that, you will have to follow the steps HERE to get around this error.

The procedure is simple but you need to install Windows Automated Installation Kit first to get some files.

The basic outline is that you download the Windows Automated Installation Kit from Microsoft, open Installer.cmd from your system folder, and choose the drive you want to install on. Read the link for complete instructions.

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You can not fully boot from a external USB drive. You can boot the installer but not completely boot. Sorry. If you want to boot the installer I'd look into this.

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