I don't have a lot of WCF experience, but generally, you want to place the CA cert in the trusted location. The client should have its own trusted location and the CA cert will need to go there too. And if this is a production service, you'll want to change the certificateValidationMode to "ChainTrust" for both client and server, which means it will trust certificates that chain up to the CA cert.
"PeerTrust" means you just place the actual cert you want to trust in the trust locations. This page may be helpful to look at.
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