In my classes I teach students to make sure their dogs can get into any position (sit,down,stand) from any position; in other words their dog will do a down from a stand, a sit from a down, a stand from a sit, etc. The idea is to keep their dog from developing a pattern of sit, down, stand; which can lead to lack of stimulus control.
Stimulus control is defined as your dogs ability to sit (or whatever cue you give) when you ask, not to sit when you don't ask, not to sit when you ask for something different and not to give you a different response when asked to sit. Confusing? Basically it means if you ask your dog to "sit" he won't lie down and if you ask your dog to "down" he won't sit.
If your dog has been taught to sit before a down, If you ask for a down, it's highly likely he will sit first rather than get into a down immediately. What this means is he hasn't actually learned what "down" means, he's learned the pattern and that's not the same thing. You want your dog to know each individual cue and be able to perform it regardless of what cue came first.
Try this experiment: with your dog in front of you and BEFORE he has the chance to sit, ask him for a down, using whatever verbal or hand signal you use for that command. What does he do? If he sits then you can be pretty sure he's learned the pattern and not the actual behavior. If he just stares at you...you both need more training! =)
If your dog just stares at you, you want to look at the cue itself. Is it clear and concise? Do you execute it the same every time? Does your dog sit on the third cue? If your verbal or hand signal is not clear to your dog, he's basically left guessing as to what you want him to do.
With regards to verbal signals, impatience is our biggest culprit. We say the cue "sit, Sit, SIT" before our dog has had a chance to process and think! So what happens is the cue actually becomes the word "sit" said three times in successive volume! Go back to asking for the sit once and then zip your lips and let him think. Reward him when he responds and then repeat. The more you do this, the faster his response will become until you have a dog that sits the FIRST time you ask not the third!
With hand signals, if you have loose, flowing or variable hand movements when you ask for sit (or any behavior), your dog can get very confused and both of you will get frustrated with each other! Your hand signal should be clear, precise and consistent every time. Figure out what feels more natural to you, or better yet, see which one your dog actually responds to, and use that!
Make sure to pair the verbal signal with the hand signal so your dog understands they mean the same thing. That way, either command can be used separately when necessary. An example might be, you come home with groceries in both hands and you don't want your dog jumping all over you, if your dog understands the verbal signal you can cue him to sit verbally and he will comply, leaving you able to walk in and put the groceries down unencumbered. Or imagine you had Laryngitis or oral surgery and couldn't speak. If your dog understands hand signals you can still get compliance from him even though your voice is out of commission.
So test your dog and yourself and see if your dog really does know "sit" and if not, help him learn! =)