Passwordprotect

Hi. I am a newbie to IT. I have just bought an external hard drive. I have windows XP home and am using a laptop. With the present setup I have a password on startup and i I close my laptop lid it requires a password to restart. I had it pointed out to me that as I am saving my large workfiles to the external drive, it is not secure as anyone could plug it into their pc and access the files. The external drive is formatted with windows XP home at the shop where I bought it. Can someone tell me how to password protect the external drive please..... Thank you!