Avoiding fragmentation

The secret is to not write uncompressed files on the disk to begin with.

Indeed, after you compress an already existing large file it will become horrendously fragmented due to the nature of the NTFS in-place compression algorithm.

Instead, you can avoid this drawback altogether by making OS compress a file's content on-the-fly, before writing it to the disk. This way compressed files will be written to the disk as any normal files - without unintentional gaps. For this purpose you need to create a compressed folder. (The same way you mark files to be compressed, you can mark folders to be compressed.) Afterwards, all files written to that folder will be compressed on the fly (i.e. written as streams of compressed blocks). Files compressed this way can still end up being somewhat fragmented, but it will be a far cry from the mess that in-place NTFS compression creates.

Example

NTFS compressed 232Mb system image to 125Mb:

• In-place compression created whopping 2680 fragments!
• On-the-fly compression created 19 fragments.

Defragmentation

It's true that NTFS compressed files can pose a problem to some defragment tools. For example, a tool I normally use can't efficiently handle them - it slows down to a crawl. Fret not, the old trusty Contig from Sysinternals does the job of defragmenting NTFS compressed files quickly and effortlessly!

You may not be able to

If there are any unmovable files on the disk it is very likely that you will not be able to have both 100% defragmented files AND 100% defragmented free space at the same time. This is because the amount of space between unmovable files may not have any combination of your files that are the same length. Plus the unmovable files themselves may be fragmented.

From memory FAT32 stores its directory structure in unmovable files, though it has been a lot of years since I've really used FAT32. Yes a directory is stored as a file on the disk that essentially contains a list of the files and folders inside it and where on the disk each of them starts. As you add more files to a directory the size of the file storing the directory information grows. This can become fragmented. NTFS allows you to defragment the directory files too.

If this is also a system drive there will be some unmovable system files too. You can get around this by putting the disk in another system or booting up from another drive/cd/dvd/usb/etc.

The developer of jkdefrag renamed his product to MyDefrag. I know that the MyDefrag tool allows you to wrap a file around unmovable files, such that the free space is 100% consolidated, and all of the movable files on the disk are in sequential order, like defragmented files, but with the unmovable files in between segments of the file. This will show the files as fragmented, but reading them will still be very fast due to them being on the disk in sequence. Reading one of these files that wrap around the unmovable files will occur in sequential disk logical block address order but with a few gaps here and there. The length of time it takes a disk to skip reading some sectors is VERY short.

Edit: Also, just because there is open free space does not mean windows or for that matter Linux will use the space you expect in a sequential nature when adding new files. You may have to defragment anyway.