On-line monitoring and diagnosis of transformers have been investigated and discussed significantly in last decade. This study has concentrated on issues arising while on-line transformer winding deformation diagnosis is going to be applied on transformers with various kinds of techniques. From technical perspective, before replacing off-line methods by on-line methods and eventually by intelligent approaches, practical challenges must be addressed and overcome. Hence, available off-line transformer winding deformation diagnosis methods are discussed precisely. Mathematical calculation in on-line short circuit impedance measurement is investigated. On-line transformer transfer function measurement setup is presented. A profound insight to the problems pertaining on-line transformer winding deformation recognition methods, characterizes existing online methods, explains the concepts behind online measurements and striving to open the discussion doors towards challenges are discussed. In the end a 400 MVA step up transformer has been taken as a case in order to clarify the capability of Frequency Response Analysis (FRA) method in fault detection while short circuit impedance could only demonstrate some rough understanding about transformer condition.