In image denoising algorithms, the noise is handled by either modifying term-by-term, i.e., individual pixels or block-by-block, i.e., group of pixels, using suitable shrinkage factor and threshold function. The shrinkage factor is generally a function of threshold and some other characteristics of the neighbouring pixels of the pixel to be thresholded (denoised). The threshold is determined in terms of the noise variance present in the image and its size. The VisuShrink, SureShrink, and NeighShrink methods are important denoising methods that provide good results. The first two, i.e., VisuShrink and SureShrink methods follow term-by-term approach, i.e., modify the individual pixel and the third one, i.e., NeighShrink and its variants: ModiNeighShrink, IIDMWD, and IAWDMBMC, follow block-by-block approach, i.e., modify the pixels in groups, in order to remove the noise. The VisuShrink, SureShrink, and NeighShrink methods however do not give very good visual quality because they remove too many coefficients due to their high threshold values. In this paper, we propose an image denoising method that uses the local parameters of the neighbouring coefficients of the pixel to be denoised in the noisy image. In our method, we propose two new shrinkage factors and the threshold at each decomposition level, which lead to better visual quality. We also establish the relationship between both the shrinkage factors. We compare the performance of our method with that of the VisuShrink and NeighShrink including various variants. Simulation results show that our proposed method has high peak signal-to-noise ratio and good visual quality of the image as compared to the traditional methods:Weiner filter, VisuShrink, SureShrink, NeighBlock, NeighShrink, ModiNeighShrink, LAWML, IIDMWT, and IAWDMBNC methods.