It looks like there should be a cover on the emitter that is missing. You generally want to run a dot on a lower setting, like 2 or 3. The idea is you focus on the target and when the dot settles on the area you want to hit you press the trigger. If your grip is solid the dot will travel straight up slightly on the target and settle back down for you to press the trigger again. If you turn it up too high the dot will steal focus from the target and you end up watching the dot. Think of the dot the same as a laser and this whole thing gets real easy.
One of the problems with turning the dot way up is it blooms - turns into a big round fuzzy blob that is like having an astigmatism. I don't think your dot is blooming because it is square. It really feels like you are missing a piece the more I think about it. In that price range you can get a Trijicon or a Holosun so you may be better off just returning it. I run Trijicon 3.25moa RMRs on all my pistols except my Staccato XC that has the 1moa SRO. Just going by the Modern Samurai Project FB group, the mid moa Holosun is what everyone likes best right now so that might be a good place to start out and find what works best for you.