It is not a rule - as in a legally binding rule but more of a rule of thumb. Also there is a range - 5 to 10%. My rule of thumb is to have a tow ball weight that will cause the back of the car to settle to about the same position as it would if two hefty blokes were sitting in the back seat - is somewhere about 1 1/2" to 2".
Also be aware of any train weight limitation - that is the total weight of vehicle, tow and load - on some vehicles this may lower the amount you can tow if the tow vehicle is also loaded up.
Garry

