In the left panel of the WebSphere admin console, select Servers > Clusters > Dynamic clusters > New. 

Step 1 (select a dynamic cluster server type)

"WebSphere application servers" is what you will almost always select.

Step 2 (select the membership method)

You can either define cluster members with a rule or manually define cluster members. It's important to recognize that you cannot change between rule or manually after the cluster has been created, so make your choice here wisely.

Step 3 (define dynamic cluster members)

If you are using a rule, the default rule is node_nodegroup = 'DefaultNodeGroup'. Check out this article to learn about DefaultNodeGroup. Long story short, all of the nodes that have been federated into the dmgr should be in DefaultNodeGroup.

Step 4 (select a dynamic cluster template)

You can either use the default template or create your own template.

Step 5 (specify dynamic cluster specific properties)

We'll get into this later