My understanding is that tracing the SLA agent should be just like tracing any other agent. Because the SLA agent is a "Standard" mode agent that uses queue manager, if none of the SLA queue items are ready to be processed at the time that you're tracing the agent you will not see any results. If you start tracing at a time when you know some of the SLA queue items are ready to be processed, you should be able to capture the output.
For environments that have the System Management application, the steps you have noted are correct.
Alternatively, in newer versions (starting with 7.2.2 I believe) you can use the Agent Management Landing page from within Designer Studio. From the DesignerStudio menu in 7.x or the Configuration menu in 8.x, you can select System > Operations > Agent Management. The below help file has more information:
I am able to trace the SLA from SMA and Dev studio in 7.2.2 but it is not tracing rules from Application RS. I tried updating the settings in tracer to add the application RS but they are not showing up there as well. Only rules from Pega RS are getting traces and available in the settings tab in tracer. This is only for the SLA tracing. When I am tracing other standard rules, there is no issue. My SLA escalation activity is getting called as I can see the updates on my case, but only I cannot trace it.