Modulation of laser′s left-handed and right-handed polarization was used in the paper. This method has realized all-optical detection of magnetic field and avoided cross talk existing in conventional atomic magnetometer. The detection principle of precession frequency of atomic magnetic moment in magnetic field was demonstrated based on the method, and the signal was analyzed, then the detection and processing system was designed based on the analysis. The in-phase signal was displayed as Lorenz lineshape. The quadrature signal was displayed as dispersion lineshape, and the magnitude was 0 at resonance frequency. The phase signal was displayed as monotonically decreasing function with frequency, and the magnitude was 0 at resonance frequency. Both the quadrature and phase signals can be used to lock resonance frequency and realize measurement of magnetic field.