Hello! Both of loco and coco are spanish words Loco means: madman, crazy and coco is used in colloquial speech to refer to the human head(brain) ,so we can translate it as "madman, get a brain":)

Yes, it means "use your brain, dude." It is slang and I would only use it, if at all, with a very good friend. Telling someone to "use his brain" is not polite no matter how you put it (because it implies that you think they're being stupid and not using their brain). Furthermore, it is very possible that even native English speakers will not understand what it means. For example, a 65-year-old retiree who lives in North Dakota is unlikely to understand this expression.