We study a simple competitive market, in which individual traders adapt their trading strategies according to past experience. Because of the limited knowledge available to them, they are forced to make decisions based on inductive, rather than deductive, thinking. We show that a population of competing traders with similar capabilities and knowledge will tend to self–segregate into opposing groups characterized by extreme behaviour. To be successful, a trader should behave in an extreme way by either always copying or rejecting past trends in the market's history. Cautious traders tend to perform poorly.