To address the noise issue in fiber optic monitoring signals in frozen soil areas, this study employs wavelet denoising techniques to process the fiber optic signals. Since existing parameter choices for wavelets are typically based on conventional environments, selecting suitable parameters for frozen soil regions becomes crucial. In this work, an index library is constructed based on commonly used wavelet basis functions in civil engineering. An optimal wavelet basis function is objectively selected through specific criteria. Considering the characteristic of small root mean square error in fiber optic signals in frozen soil areas, a multi-index fusion approach is applied to determine the optimal decomposition level. Field observations validate that denoised signals, with parameters set appropriately, can more accurately identify locations where settlement occurs.