The England international has endured a torrid start to his Anfield career following his summer move from Chelsea which has culminated in him being dropped to the second-choice side.
But Dalglish said it was a good opportunity for Cole to both get some match practice and impress his new manager.
“All the players are starting afresh now and it is up to them to impress," said Dalglish. "Joe will get an opportunity. If they want to play, they have got to impress.
“Some people look at reserve-team football for first team players as a punishment, but this was a necessity for everybody. It wasn’t a punishment in any way, shape or form and, if it was a punishment, the players would have been told that.
“I will say to Joe what I will say to every player - we will give every single one of them every opportunity to impress in whatever way we can. At the end of the day, Liverpool FC is going to be the benefactor.
“And, I have to say, they have all impressed since we have been here. We can only put 11 on the pitch.”