Early in his career Sherlock Holmes trained himself to become a "private consulting detective." He told Watson when they first started sharing rooms at Baker Street that he was not interested in any knowledge that was not of use to him in his work. Their conversation on the subject is contained in the opening chapter of the novel A Study in Scarlet (1887). Holmes uses his extraordinary powers of deduction to solve mysteries, but he also relies heavily on his magnifying glass, microscope, and chemistry apparatus. He has an expert knowledge of all sorts of scientific subjects that are useful in detection. He is also a a great reader of anything that may be of use to him now or in the future. He reads all the newspapers and keeps clippings of articles about crimes and criminals. He also has his own personal set of files, so that he is better informed on the subject of crime that almost anyone in Europe. The police frequently come to him for advice. This is advantageous because the police are usually willing to give him help in return if he asks for it. Using the police for information and assistance is another of the methods Holmes employs to solve mysteries.

In "The Red-Headed League," Sherlock Holmes becomes interested in Jabez Wilson's apparently petty problem because he suspects that Wilson's assistant, who calls himself Vincent Spaulding, is really the notorious John Clay, described later by a man from Scotland Yard as:

“John Clay, the murderer, thief, smasher, and forger."

Holmes knows all about Clay's career because he is so well informed about crime and criminals through his reading, record-keeping, and many informants. He deduces that Clay must have some important ulterior motive for working in Wilson's shop. Holmes' cases almost always take him to the scene of the crime—or, in this case, to the scene of the anticipated crime. This is the author's way of bringing the reader, in imagination, to that same scene. One of Holmes' most commonly employed methods of solving mysteries is to make minute examinations of crime scenes, where he picks up minute clues that could easily escape the attention of police professionals. From what Wilson tells him about Clay's supposed interest in photography, Holmes makes deductions that would never occur to the "not over-bright pawnbroker."

“Oh, he has his faults, too,” said Mr. Wilson. “Never was such a fellow for photography. Snapping away with a camera when he ought to be improving his mind, and then diving down into the cellar like a rabbit into its hole to develop his pictures."

Holmes quickly deduces that Clay must be digging a tunnel, and by inspecting the neighborhood he deduces that the tunnel must be aimed at the Coburg branch of the City and Suburban Bank, where he later learns they are storing an enormous fortune in French gold coins.

So Holmes relies on his accumulated knowledge, his record-keeping, his personal investigation, and his deductive powers to capture John Clay and send him to the gallows. It is fortunate for the directors of the bank that Jabez Wilson came to Holmes with his trivial problem involving the nonexistent and now defunct League of Red-Headed Men.

Sherlock Holmes decided while he was still relatively young to become what he terms a "consulting detective." This suits his talents, interests, and personality. He is a moody, solitary,, studious type of person who would find it difficult to work for anyone else. He creates a profession which enables him to be self-employed and even to work at home at hours of his own choosing. He is able to enjoy an ideal lifestyle because he solves most cases brought to him and therefore gets many lucrative cases.

Holmes is noted for his powers of deduction, but he has acquired all sorts of practical knowledge suitable to his profession, and he keeps extensive files and newspaper clippings which often prove useful in handling cases. He knows a lot about chemistry, anatomy, and other scientific subjects, some of which he studied at the university and others he has learned by himself. He is always reading, experimenting, and studying. He often tells his friend Watson that it is unwise to theorize without having sufficient facts, and he has said, "I cannot make bricks without straw." In other words, he is not a mere thinking machine. 

In "The Red-Headed League," Holmes demonstrates various methods he uses in solving crimes. For instance, he knows a lot about Jabez Wilson's assistant because he spends so much time learning about the more important criminals in England, one of whom is John Clay, who is posing as Vincent Spaulding. Holmes is always traveling to the scenes of crimes or of probable crimes to make detailed inspections. In "The Red-Headed League" he examines the area around Wilson's pawnshop at Coburg Square and deduces that John Clay's objective is to dig a tunnel from the pawnshop basement to the nearby bank in order to commit a spectacular burglary.

“Let me see,” said Holmes, standing at the corner and glancing along the line, “I should like just to remember the order of the houses here. It is a hobby of mine to have an exact knowledge of London. There is Mortimer's, the tobacconist, the little newspaper shop, the Coburg branch of the City and Suburban Bank, the Vegetarian Restaurant, and McFarlane's carriage-building depot." 

Holmes will commit all this information to his memory and perhaps find it useful to solving another case at some time in the future. It is because Holmes is always making such inspection trips that the stories are so interesting. The reader accompanies Holmes and Watson in his imagination and meets all sorts of interesting people and sees many interesting sights. In "The Red-Headed League," the reader meets Jabez Wilson, John Clay, and Mr. Merryweather the bank director. The Sherlock Holmes stories are always combinations of ratiocination and adventure--sometimes danger.

So Holmes uses his brain, but he uses all the resources available to that powerful brain, including memory, scientific knowledge, books, newspapers, and voluminous files, to acquire the facts he needs for his deductions. He is not an "armchair detective." He is very energetic when he needs to be. He has a vast storehouse of knowledge which is all useful to his profession, and he cares little about anything that does not have practical value for his work. He has published many monographs on highly specialized subjects. He becomes successful and famous over the years, so that he never has to worry about money and can take only the cases that interest him. "The Red-Headed League" is an example of a case he solves without collecting any fee. Another is 'The Adventure of the Speckled Band," and there are many others recorded by his friend and biographer, Dr. John Watson.

When Holmes first meets Dr. Watson in the novel A Study in Scarlet, he describes himself as "a consulting detective." There are many police detectives and many private detectives, but Holmes is the only detective so distinguished and accomplished in his profession that detectives actually come to consult him. Holmes devotes his whole life to solving crimes. He uses every possible method a detective could use. He is adept in science, in so far as it applies to detection. He is constantly working with chemicals and conducting experiments. He reads all the daily newspapers and keeps in touch with everything that is going on in England. He has extensive files on criminals, criminal trials, unsolved crimes, and whatever else is related to crime and criminals. He has an extremely retentive memory. He relies heavily on his own knowledge and past experience. He even keeps records of all his own cases.

Holmes is famous for his powers of deduction. But he uses both deductive and inductive reasoning. He is constantly complaining that he must have concrete facts. In other words, he accumulates facts and then uses deduction to interpret them. He is always looking for clues. He will get down on hands and knees to examine the grass or the surface of a carpet or a hardwood floor. Sometimes he will spend hours, or even days, doing nothing but smoking his pipe and thinking about what he has seen and heard. In the final analysis, it is his own superlative brain that enables him to solve most cases, even though he has to do a lot of on-the-spot investigation. He conducts some of his investigations in disguise, because he is known as a master of disguise, as shown, for instance, in "A Scandal in Bohemia" and "The Adventure of the Empty House."

As an example of Holmes' methods, the detective goes with Watson to get a look at Jabez Wilson's assistant, who calls himself Vincent Spaulding, and to explore the area around Wilson's pawnshop in Saxe-Coburg Square. Note that he tells Watson:

“My dear doctor, this is a time for observation, not for talk. We are spies in an enemy's country. We know something of Saxe-Coburg Square. Let us now explore the parts which lie behind it.”

Holmes must observe before he deduces. He is the most versatile detective in fiction and has been the model for innumerable imitators. He spends a great deal of time back at Baker Street thinking about what he has seen and what Wilson had told him in their initial interview. Holmes uses his extensive knowledge of crime and criminals to conclude that Vincent Spaulding is really the notorious and dangerous John Clay. After the case is solved, Holmes explains his thought processes to Watson.

“You see, Watson,” he explained in the early hours of the morning as we sat over a glass of whisky and soda in Baker Street, “it was perfectly obvious from the first that the only possible object of this rather fantastic business of the advertisement of the League, and the copying of the Encyclopaedia, must be to get this not over-bright pawnbroker out of the way for a number of hours every day....From the time that I heard of the assistant having come for half wages, it was obvious to me that he had some strong motive for securing the situation.”

Holmes is a real expert in his profession. It is too bad that there aren't more like him in many professions. He uses every possible method for solving the cases that are brought to him. And he enjoys an enviable lifestyle which enables him to work when he pleases only on cases that intrigue him, and to spend much time loafing at his ease in his comfortable rooms at 221B Baker Street. As time goes by he becomes more and more famous, so that he receives large fees from important people who come to him for help even from foreign lands. In "The Adventure of the Priory School," for example, Holmes receives a check from the Duke of Holdernesse for six thousand pounds, a sum which must be the equivalent in buying power of at least a million contemporary American dollars.