Yes, candle 1 is the one on the left side of the current candle, the previous candle.
This block works with values from multiple candles, so 10 means that the values from 10 candles will be checked. Not only candle 1 and candle 11. If I'm not wrong, values from candles 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 will be checked.
Exception of few candles... Yes, this is if you want to allow the rules to fail for few candles