In the title of the essay, Tolkien embraces Romanticism. The idea of using "fairy stories" as a way to capture the individual imagination and spirit of subjective creativity are Romantic ideas. To this point, the opening sentence of the essay is filled with Romantic notions of the good:
I PROPOSE to speak about fairy-stories, though I am aware that this is a rash adventure. Faerie is a perilous land, and in it are pitfalls for the unwary and dungeons for the overbold. And overbold I may be accounted, for though I have been a lover of fairy-stories since I learned to read, and have at times thought about them, I have not studied them professionally.
Romanticism can be seen in how Tolkien describes fairy stories as a "rash adventure," embracing the "carpe diem" initiative within Romanticism. The journey and "adventure" to which he alludes are also Romantic notions of the good, emphasizing the overall condition of consciousness where the unknown is embraced over banal routine. There is passion in Tolkien's "love," reflecting the passion that is so much a part of Romantic idealism.
From this, Tolkien engages in seeking to define what "the fairy story" should be." This is a Romantic notion of the good as it seeks to transform what is into what can or should be. It is Romantic because it challenges the Status Quo into something new and innovative. Romantic thinkers were driven to challenge what existed and sought to make it different, into what it could or can be. The focus on children's imagination as part of the process of reconfiguring what these stories could be is another example of how Tolkien uses the transformative imagination element in his essay that is intrinsic to Romanticism.