First, use a candy thermometer if you have one. However, sometimes they need a bit of calibrating and aren't exactly accurate. (I completely burned the first batch of caramel apples I made to photograph for this article because I had a new thermometer that I hadn't checked!)
*To do the cold water test, simply have a small bowl, such as a cereal bowl, full of very cold water next to your work area. When you want to test the caramel, scoop a small amount of caramel out and drop it in the water. After a few seconds, take it out with your hands and press it lightly between your thumb and forefinger. If it's firm, but still very maleable, it's ready. Another visual confirmation is that the caramel will cling to the back of a spoon that's dipped in it and will run off in thick threads. You can see photos of this at The Science of Cooking.
You're welcome to heat the caramel to a higher temperature - and in fact, you may be tempted to, as the mixture still looks quite thin at 255°F - but you should know: the higher you heat it, the more brittle your candy coating will be, which may or may not be desirous. Also, it will also peel off your apple more readily rather than cling to it and may, in fact, slowly slide right off over the course of a day or two if left to sit in any humidity whatsoever. This is thanks to the fact that we're using honey rather than a crystalline sugar, but the upside is that honey caramel tastes better. :) To decide how brittle you'd like your coating, see this article on the stages of candymaking.