Hi - No strict rules as such, just some guidelines:
You can play it safe by using chords that are consonant AND contain only notes from the key that the song is in,
or
you can live dangerously by experimenting with dissonant chords and chords with 'out of key' (chromatic) notes.
Consonant (blending) chords are majors, minors and sixths (and maybe 7ths in bluesy songs, like TE's arrangement of Amazing Grace). Most others chords are dissonant (clashing).
'In key' chords (in the key of E) contain only notes of the E major scale:
E F# G# A B C# D#
which combine to give you the following set of chords.
E, F#m, G#m A, B, C#m D#diminished. (You can extend them by adding more scale notes to make 7ths, 6ths, 9ths, etc).
Dissonant and especially chromatic 'out of key' chords often need to be followed by specific chords to sound good - so if you're not sure of the effect that your chosen chord is producing in the ear of the listener - play it safe and stay in key with fairly simple chords such as majors, minors 6ths and 7ths.
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