Large errors in the digital signal modulation recognition algorithm for the general wavelet transform, we propose a discrete optimization algorithm based on wavelet transform, which is generally improved algorithm based on wavelet transform algorithm, the original algorithm in order to avoid redundancy Yu phenomenon, discrete variable domain transform operation, the wavelet transform and then use the algorithm to improve the amplitude modulation of digital signals, quadrature amplitude modulated signal, a digital frequency-modulated signal and the digital phase modulated signal is identified. Simulation results show that the discrete wavelet transform algorithm optimization wavelet transform algorithm than the digital signal modulation recognition applications to identify errors in the proposed smaller, more accuracy.