I bought and installed Shimano MT200 brakes to my bike and now I'm wondering are they installed correctly. Seems like only small area of pad is touching the rotor. 160 mm rotor in the front. I had some bad Tektro mechanical brakes but replaced them with these Shimano MT200 hydraulic ones.
Pictures of different angles: https://i.sstatic.net/kbaWp.jpg
[This answer is based on OP's pictures and comments about what worked in the end]
The fork has IS brake mount interface, the brake caliper is for PM (post mount) interface. An adapter to keep them together is required.
IS/PM adapters come in many variants. The main difference between them is the disc diameter difference they dictate. Just a few examples (the image taken from one of discount retailers) of visual differences between such adapters is demonstrated below. Compare No. 1 — No. 3 (No. 4 seems to be a PM/PM adapter):
An adapter marked as "+0 mm" incurs no difference in disc size. That means, if the wheel has 160 mm disc installed, it will work a fork meant to have 160 mm rotors and with +0 mm adapter. An adapter marked as "+20 mm" will require 180 mm disc to match the rest of the same setup.
Now, the trick is that the same IS/PM adapter part is asymmetric and can provide two offsets, depending on the direction it is installed.
Compare two pictures from the @MT247 question and comments.
Another, very confusing, culprit is that a different adapter should be installed in the back of a bike compared to what is installed in the front! That is, to work with a 160 mm rear disc and an identical caliper, a different IS/PM adapter may be required.
The key here is to carefully read the manufacturer's installation instructions and use common sense when inspecting the brake setup: brake pads and the disc must overlap over the whole area.
Your brake is certainly not properly set up. Do not ride the bike in this state!
The rotor's brake track must run fully between the brake pads. The radial dimension of both match.
You rotor may be too small for the brake it its present set up, your wheel not properly inserted, or the brake caliper not mounted correctly.
Check your brake's manual for adjusting it to different rotor sizes with adapter plates. Often an adapter can be flipped to accommodate 140 mm and 160 mm rotors.
As general advise: do not fix it yourself.
Ask someone who knows what they are doing, for example, a certified mechanic. That you have to ask this question indicates you are not ready to tinker with brakes that are relevant to rider's safety.
There are too many spacers, and/or too small of a rotor.
Don't ride it this way, get it fixed first.
