sfmedic, your graphic is excellent, and it makes it easier to discuss this target.
Your sight picture shown is how I sight a handgun, but others prefer (or naturally use) a different sight picture. I know many shooters who use a 6:00 hold, and they want the target centered above the front sight post. How high above? well, that is hard to say, and it is one reason why I like to center the target on the top edge of the front sight.