The CAGED Theory is a system used to help a guitarist organize the fretboard. It may be a little confusing at first but it truly is a very simple concept.
"CAGED" spells out the five Open Chords. Think of each open chord as a "Shape". We are going to move that Chord Shape up the fretboard to form a Bar Chord. Let's start with the two easy ones, A and E.
Get familiar with the E & A Shaped Bar Chords (or Barre Chords). Hold each chord and pick through letting each note ring out. If you are having trouble ringing out the notes, go ahead and strum the chords until your fingers get use to the shapes.