In the dense wavelength division multiplexing (DWDM) there are many factors affecting their performance. These factors can be divided into linear and nonlinear effects. The linear effects such as chromatic dispersion (CD) and polarization mode dispersion (PMD) can be compensated easily by dispersion compensation fiber (DCF) or fiber Bragg gratings (FBG). The nonlinear effects are the major and most dangerous factors that affect the signal quality and the overall performance of the DWDM. The nonlinear effects can be divided into self-phase modulation, cross phase modulation, four waves mixing, stimulated Brillion scattering and stimulated Raman scattering. This paper discusses the nonlinear effects of the DWDM system and the different ways to overcome these effects to improve the overall signal quality. This simulation analysis was performed using Optisystem (7) simulator.