You already know five open chords: C, A, G, E and D. CAGED is the idea that each of them is also a moveable shape. Slide any of them up the neck (with your index finger taking the place of the nut) and it becomes a different chord. Move them around until they all spell C major and they line up end to end, in that order: C, A, G, E, D, then the C shape again an octave higher.
That's the whole system. Five shapes cover the neck, each one overlapping the next by a string or two. Learn where they sit for one chord and you know where every chord tone, and every scale note around it, lives.
How this chapter works
We use C major throughout. Each lesson takes one shape, shows you the chord, the arpeggio and the C major scale that surrounds it. The last lesson links them.
The exercise here is a map: the top three strings of each shape, climbing from open position to the 12th fret and back. Every chord is a C major triad (C, E, G), just in a different place.
The common mistake is memorizing shapes as finger pictures and never noticing where the root is. Each time you strum, find the C in the shape. Practice at 60 bpm, saying the shape name aloud as you change. The second exercise picks the same shapes one string at a time. The third plays a single C from each shape before the chord, so you hear where the root sits.