How to Perform Salat-ul-Istikhara and Dua of Istikhara

Istikhara (Arabic) means to ask Allah to guide one to the right thing concerning any affair in one’s life,
especially when one has to choose between two permissible alternatives.

How to pray Salat-ul-Istikhara step-by step:

1.  Perform Wudu (the ablution) if you do not have it already. 
2.  Pray 2 raka’at either with the intention of praying Istikhara separately by itself  or jointly with 2 rakat of,
for example, tahajjud. 
3.  Immediately after you have completed the 2 rakats, recite the abovementioned Istikhara Dua. 
4.  Name the deed you wish Allah to provide you with guidance about. 
5.  Follow An Nawawi’s advice on how to interpret Allah’s guidance (again see above). 
6.  There is no limit on the number of times you can pray Salat-ul-Istikhara. 

Istikhara Dua:

‘Allahumma inni astakhiruka bi’ilmika, Wa astaqdiruka bi-qudratika, Wa asaluka min
fadlika al-’azim Fa-innaka taqdiru Wala aqdiru, Wa ta’lamu Wala a’lamu, Wa anta
‘allamu l-ghuyub. Allahumma, in kunta ta’lam anna hadha-l-amra Khairun li fi dini wa
ma’ashi wa’aqibati amri (or ‘ajili amri wa’ajilihi) Faqdirhu li wa yas-sirhu li thumma
barik li Fihi, Wa in kunta ta’lamu anna hadha-lamra shar-run li fi dini wa ma’ashi
wa’aqibati amri (or fi’ajili amri wa ajilihi) Fasrifhu anni was-rifni anhu. Waqdir li al-
khaira haithu kana Thumma ardini bihi

Istikhara (Arabic) means to ask Allah to guide one to the right thing concerning any affair in one’s life,
especially when one has to choose between two permissible alternatives, e.g. a career choice, getting married,
etc.  Similarly, a traveller should consult good righteous persons before setting out on a journey, because Allah
says,
“And consult them (O Prophet) in affairs (of moment),” (Qur’an, 3: 159)
and one of the characteristics of the believers is that
“they (conduct) their affairs by mutual consultation” (Qur’an, 42: 38).
Qatadah said,
“Every people who seek the pleasure of Allah and consult with one another are guided to the best course in their affairs.”
The traveller should also make istikharah and seek guidance from Allah.

Sa’ d ibn Waqas reported that the Prophet, peace be upon him, said,
“Istikharah (seeking guidance from Allah) is one of the distinct favors (of Allah) upon man, and a good fortune for the son of Adam is to be pleased with the judgment of Allah. And a misfortune of the son of Adam is his failure to make istikharah (seeking Allah’s guidance), and a misfortune for the son of Adam is his displeasure with the judgment of Allah.”

Ibn Taimiyyah said,
“He who seeks guidance from the Creator and consults the creatures will never regret it.”

[Source: http://theislamicworkplace.com/2006/12/25/before-any-major-decision-pray-salat-ul-istikhara ]