Everyone has their own way of applying stencils. My two favorite methods are using water soluable pencil for large quilted items as they (the markings made) will stay on the fabric until you wash it out and air soluable marker when doing small items and small areas - whereas you have to work really quickly before they disappear. I don't like chalk, its too messy for me and sometimes doesn't all come out completely if you mark too hard on accident.
Explosive blessings, abundance and inspiration to you all!
- The Creative Seamstress