Overview
Chords can be inverted by moving the lowest note up an octave. The lowest note after the inversion, i.e. the bass note, determines the name of the inversion.
Take for example the C major chord. As you can read in my detailed article for Chords Theory, the C chord consists of the following triad: C-E-G, thus C is the root, E is the third and G is the fifth.
Read on, to see this process in detail.
Identifying a Chord in root position
We continue with our example of the C chord (triad), that consists of C-E-G. Remember, the lowest note, called the bass note, determines the name of the inversion.
You can see a C chord written below. How can we tell if this in root position?

The lowest note in our case is C. See it below:

Chord first inversion
Now, let’s invert the chord.

It is now E, the chords third. That is why the chord is now called first inversion.
See it below:

Chord second inversion
Let’s invert the C chord again.

It is now G, the chords fifth. That is why the chord is now called second inversion.

Chord third inversion (back to … position)
Let’s invert the C chord once again.

It is now C, the chords root. That means that the chord is now at root position, but one octave higher.

Chord inversion reference
Use this chart for reference to chords (triads) inversion.

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