NO, the LED plugs into X3, X1 and X2 are for setting your gains on a rotary dial on your transmitter.
If you only have one dial then plug that AUX channel (the dial) and the other end to either X1 or X2.
Then on your basic settings set the Pitch, Roll, and Yaw on X1 and hover and turn the dial until it's rock solid (no wind is better) and if the Yaw and altitude are fine then inhibit the basic gains and set the ATTI gains to X1 or X2 (whichever you used)
If you have two dials on your TX then you can use basic gains on X1 and ATTI gains on X2.