In this research, the wavelet transform is used to analyze time response of a cracked beam carrying moving mass for damage detection. In this respect, a new damage detection method based on the combined use of continuous and discrete wavelet transforms is proposed. It is shown that this method is more capable in making damage signature evident than the traditional two approaches based on direct investigation of the wavelet coefficients of structural response. By the proposed method, it is concluded that strain data outperforms displacement data at the same point in revealing damage signature. In addition, influence of moving mass-induced terms such as gravitational, Coriolis, centrifuge forces, and pure inertia force along the deflection direction to damage detection is investigated on a sample case. From this analysis it is concluded that centrifuge force has the most influence on making both displacement and strain data damage-sensitive. The Coriolis effect is the second to improve the damage-sensitivity of data. However, its impact is considerably less than the former. The rest, on the other hand, are observed to be insufficient alone.