The CAGED system
CAGED is a somewhat often heard term and refer to the chords C, A, G, E and D, all major. And in specific how these chords are played in open position.
The shapes for these can be used all over the fretboard and based on barre chords. Most common is the E and A shapes in major barre chords. The D shape is also somewhat often used whereas the C and G shapes used in barre shapes are not very convenient.
The advantage with CAGED is to use a way to systematize the notes on the fingerboard.
How to use CAGED?
As already mention you can use the shapes of the chords in front of a barre (or a capo) and play all possible major chords. The chords are based on them, therefore they can be good to know about.
Notice that some of these are hard to achieve, since they demand a great stretch. Therefore, the G shape is not very used in this aspect. As already said, the most common shapes are the A and E shapes, which are used for standard barre chords.
Examples of CAGED chords
Some examples of chord based on C, A, G, E and D shapes.
G (C shape)
C# (A shape)
B (G shape)
F (E shape)
E (D shape)
The C shape in front of a 3-string barre on third fret creates a G major.
The A shape in front of a barre on fourth fret creates a C# major.
The G shape in front of a barre on fourth fret creates a B major.
The E shape in front of a barre on first fret creates an F major.
The D shape plus the root note on second fret creates an E major.
A more convenient way to use the C shape is to skip the 1st string; therefore, D major could be played as X5423X instead of X54232.
The CAGED system doesn't stop on major chord, it is possible to continue on with the (almost) same approach on minor chords. Only almost, since Gm and Cm are not suited for this.