There are various opinions on where to put the temperature sensor. In my case, going the easy way, I made a cut in the hose going from the trans to the cooler, and installed a T fitting (one hole for the sensor, the other 2 holes had hose barbs) there. This is one of the hottest temp readings to get.

If I had a steel trans pan, or could weld aluminum, I might have opted to put the sensor right in the trans oil pan. The temps would be lower here than coming out of the trans. I think as long as you know where your trans operates based on where the temp sensor is (so you can see if it's getting dangerously hot for whatever reason), where you put the sensor shouldn't matter.

There are trans temp gauges, that come with sending unit, I have an autometer brand gauge like this one. Even with where I put the sensor, I haven't seen the temps over the mid-range of this gauge, even in stop n go traffic. I do have a trans cooler that has a fan installed where I can turn it on in traffic, and that is a nice backup to have but frankly I haven't used it much, mostly just to test that it works. I put mine on a manual switch.