Since it is not an official game mode for self-found in Diablo 3, everyone has come up with their own rules for playing self-found. Here are the three types I see the most often.
In the most strict rule set you can only use items that your self-found character has found on their own. Not only can you not use any items that other players have found, you can’t use any items your alternate characters have found either. No farming items on your max-geared Barbarian and trading them down to your baby Demon Hunter. This is the “hardcore mode” for self-found. There is one variant in which you can’t even use the bank to store items for later for an even more pure self-found.
In this rule set you are allowed to use any item your character finds or any of your alternate characters find. This means you can use a high level alternate character to farm high quality items for your low level characters. However, the high level character must also be self-found. If you bought items from the auction house to gear up that high level character, that character is now tainted. Any items you farm with him is now also tainted, and so sharing items he finds with a low level character will taint the low level.
Self-Found with Trading
In this version of self-found you mostly use items you find on your own or your alts but are allowed to trade with other self-found players in person in games. The auction house is off limits. This is how Diablo 2 trading worked. Some players prefer the purity of trading one on one in person, not the mass trading that the auction house allows. For the most part, only legendary items are traded. Gold isn’t very useful to self-found players. There is some caution here as some players will say they are self-found but are really not. You can find self-found communities online to have little bit more trust in your trading partners. In one variant, you are also not able to join public games either because of the possibility of being “carried” by the other players who are decked out in auction house items.
Of course, there are hardcore versions of each of these for those players that like to play in hardcore mode. Not only is a character lost on death, they also have weaker items than someone that uses the auction house. It’s a big challenge. I’ve heard someone has been able to complete Monster Power 10 self-found, though they may have received items from friends who were not self-found.
I follow the Shared Self-Found rules myself. However, I made an exception to farm items with my monk whose items were bought from the auction house early in the game’s life. In reality, he is tainted but I did not want to throw away all the farming time I spent getting those items. He is my chief farming character for my alternate characters. When an alternate character gets to Hell, they need some help with items to progress. I bring my monk to hell and just farm rares with his Nephalmen Valor and Paragon Level bonuses.