What about psychosis? Listener question

A relative of mine was recently sectioned and diagnosed with psychosis. I understand psychosis to be a condition in which contact is lost with external reality. I spoke to them just before they went into hospital and I could see that what they were saying did not relate to my understanding of reality. But aren’t we saying in the conversation that there is no external reality any way. If that is the case then aren’t we all psychotic if we believe there is? How come there can be degrees of reality?